World's Energy

26 March 2008 - Upstream OnLine - Russia's Stroytransgaz has inked a deal with Iraq to reactivate an oil export pipeline to Syria's Mediterranean terminal of Banias. US forces bombed the 300,000 barrel per day pipeline on the Iraqi side during the 2003 invasion that removed Saddam Hussein from power. According to Reuters, resumption of Iraqi oil exports through Banias would net Syria an estimated $1 to $1.5 billion a year in transit fees. A statement by Stroytransgaz said: "The participation of Stroytransgaz in this project will represent a substantial contribution by Russian firms to reconstruction and modernisation of Iraqi economic infrastructure." Last week, Russian President Vladimir Putin wrote a letter to Iraqi Prime Minister Nuri al-Maliki calling on him to support Russian investments in the country. The letter was sent as a delegation of Russian businessmen was visiting Baghdad. The delegation included the head of oil major Lukoil , which is trying to revive a $3.7 billion Saddam Hussein-era deal to develop the West Qurna oilfield, one of Iraq's largest. Putin specifically mentioned in his letter a project to rebuild the Kirkuk-Banias pipeline and West Qurna. Iraq has repeatedly said the West Qurna deal had been cancelled and Lukoil would have to compete with other firms at a new tender.

MOSCOW, March 26 (RIA Novosti) - Stroytransgaz, one of Russia's largest engineering and construction companies, and Iraq's North Oil Company held another round of talks on reconstructing an oil pipeline in Iraq, the Russian company said. The Kirkuk-Baniyas pipeline designed to transport crude from north Iraqi fields to the Syrian port of Baniyas, was destroyed by the U.S. Air Force during an invasion of the Middle East country in 2003. The parties signed a protocol on Stroytransgaz's involvement in the project to inspect and reconstruct the pipeline and discussed the pipe's technical state and working conditions. Stroytransgaz, which is partly owned by Russian energy giant Gazprom, builds oil and gas facilities and operates in 15 countries.

March 25, 2008 - United Press International - China is ready to join the Iran-Pakistan gas pipeline if India drops out of the $7.4 billion project, Dawn newspaper reported Tuesday quoting Pakistani sources. The report said Pakistan had urged Iran earlier this month to make the project final by next month because of its growing demand for natural gas. Iran informed Pakistan if India remained reluctant to join the project under pressure from the United States, Iran would then invite China to do so, the report said. "(The) Chinese have told us that they are ready to join it," a source in Pakistani petroleum ministry told Dawn. While Pakistan and Iran have completed a gas purchase agreement, India is yet to do so largely because of differences with Pakistan over the transit fee for the fuel transported through Pakistan. The report said Pakistan wants Iran to increase the volume of gas it will supply by 50 percent if India opts out of the deal. It wasn't clear how the specifications would change if China comes into the project.

24 March 2008 - Upstream OnLine - Russian President Vladimir Putin called on Iraq to support Russian investments as the head of oil major Lukoil landed in Baghdad in a bid to revive a Saddam Hussein-era oil deal. Moscow has long fought hard to regain some of the Iraqi positions lost after the US led invasion, including the $3.7 billion deal to develop the West Qurna oilfield. Putin's appeal to Iraq, in a letter to Iraqi Prime Minister Nuri al-Maliki, was the highest-level intervention to date. "Our companies are ready to increase their contribution to rebuilding and modernising Iraq's economic infrastructure, primarily in the oil and gas industries where we have accumulated large experience and have good prospects for the future," the Kremlin quoted Putin as saying in the letter. "I hope the Russian business community's intent to broaden cooperation will receive appropriate support from the Iraqi leadership," the Kremlin quoted the letter as saying. According to Reuters, the Kremlin said the letter specifically mentioned a project to rebuild a pipeline from Iraq's Kirkuk oilfield to Syria's Mediterranean terminal of Banias, in which Russian firms hope to participate, as well as the West Qurna field. Lukoil head Vagit Alekperov and Russia's deputy foreign minister, Alexander Sultanov are currently visiting Baghdad to meet Iraq's political leaders. "The chief of Lukoil will discuss with the Iraqi oil ministry the former oil contracts which have problems, one of which is the contract for West Qurna," Hoshiyar Zebari, Iraq's foreign minister, told reporters. LUKOIL has long hoped to revive the 1997 deal to tap one of Iraq's biggest oil deposits, but talks have been complicated by the fact that the contract was scrapped by the government of Saddam Hussein shortly before it was toppled in 2003. Baghdad is also in discussions with Chevron and Total to develop the same field. "We suggested to them they had better to discuss this issue directly with the oil ministry to reach a satisfactory compromise for both sides and not to be the prisoners of the past," Zebari said. "This contract, according to the Iraqi government, is cancelled," he added.

Mar. 25, 2008 - Kommersant - Russian President Vladimir Putin has sent a letter to Iraqi Prime Minister Nuri al-Maliki stating that Russian companies are prepared to take part in the restoration and modernization of Iraq, especially in the fields of electricity and oil, where Russian companies have extensive experience. Among the more promising possibilities are contracts to develop a second line at the West Qurna oil deposit and to reconstruct the Kurkuk-Banias oil pipeline. “I am counting on the readiness of Russian business to develop cooperation receiving adequate support from the Iraqi leadership,” Putin writes. He added that Russia is interested in developing relations with Iraq in all fields. “The documents signed at the session of the Russian-Iraqi commission on trade, economic and scientific cooperation and the intergovernmental agreement on settling the Iraqi debt to Russia on credits provided earlier are, in our view, a good basis for intensification of partnership relations,” the Russian president states in the letter. The letter was given to the Iraqi prime minister by the special representative of the Russian president in the Middle East, Russian Deputy Foreign Minister Alexander Saltanov.

MOSCOW, March 24 (RIA Novosti) - Russian companies are prepared to become more closely involved in the reconstruction and modernization of Iraq's economy, primarily in the energy and oil and gas sectors, the Russian president said on Monday. "Our companies are ready to increase their contribution to the reconstruction and modernization of Iraq's economic infrastructure, primarily in the energy and oil and gas spheres, where we have accumulated extensive experience," Vladimir Putin said in a message to Iraq's prime minister, which was released by the presidential press service. He mentioned a contract to develop the second stage of the West Qurna-2 oil field and a project to modernize the Kirkuk-Banias oil pipeline as among the most promising areas of Russian business participation. "I am expecting that Russian businesses' proactive mood will be matched by adequate support from the Iraqi leadership," the president said. He said the Iraqis possessed the ability to build a strong and independent state that would become an important factor in regional stability. The message was handed over to Prime Minister Nour al Maliki by Russian Deputy Foreign Minister A. V. Saltanov, who is also the president's special envoy to the Middle East. Iraq has been plagued by violence since the formal end of the U.S.-led invasion of the Middle East state in 2003. Over 100 people have been killed in the last two weeks in a series of bomb and mortar attacks throughout Iraq. U.S. troop deaths now stand at 4,000.

MOSCOW. (RIA Novosti economic commentator Oleg Mityayev) - Oil prices have confidently settled at a level above $100 per barrel, reaching a new all-time high of $109.72 in New York on March 11. At this rate, oil may soon cross the mindboggling level of $120 per barrel. This steady growth is not at all the result of insufficient production, but is fuelled by profiteers who view oil futures as an attractive investment instrument at a time of the dollar's decline. There are no objective fundamental economic reasons, such as growing demand combined with insufficient supply, for such a rise in global oil prices. Consumers enjoy stable supplies and even store surplus fuel. Spring is often a "dead season" on the global oil markets. The demand for fuel oil used for heating drops substantially in northern hemisphere compared with wintertime, while summer vacations with the usual surging demand for car fuel is still far away. Oil refineries all over the world, the main customers for crude, suspend operations in spring to shift from fuel oil to gasoline production. Therefore, OPEC's decision to maintain the current production level means in fact excessive supply at a time of low market demand for oil. Nevertheless, OPEC president Chakib Khelil expects global oil prices to reach $110-$120 per barrel, for reasons other than the organization's policies. The key reason behind this situation is the continued fall of the U.S. dollar against other national currencies, which naturally fuels the rise in oil denominated in dollars. The U.S. Federal Reserve is cutting interest rates in a desperate attempt to rescue the country's economy, which effectively makes investment in the dollar even less attractive. The FRS has cut interest rates from 5.25% to 3% since last August, and is expected to bring it own to 2.25% this month, according to estimates. Other financial markets are just as unstable, especially in the United States, where the loan market is still shaky after last fall's mortgage crisis, and the stock market is enjoying the repercussions. Considering all of the above, most profiteers and large investors alike have found a safe harbor for their capital - crude contracts, a fail-proof tool as oil has been on a steady rise in the past few years. However, the problem with overinflated oil futures is that they in no way reflect the fundamental situation on the market. The oil "bubble," so attractive for investors trying to get away from the dollar, should burst as soon as it becomes clear that the market is oversupplied with oil, which won't be too long. How will it happen? A similar situation was witnessed in August-September 2006, when oil dropped 35% in two months, from $78 to $58 per barrel, as a result of a long-time accumulation of oil in the United States. Therefore, even if oil reaches $120 soon, it won't be for long. It will probably drop after a few weeks, most likely to $70-$80 per barrel, a comfortable level for major oil producers, members of the Organization of Petroleum Exporting Countries and Russia, who gained record profits last year with the average oil price of $72.5. Leading economies, key oil consumers, will also sigh with relief. Even the U.S. economy may get out of the recession sooner. As for a longer-term forecast, most analysts agree that there will be no such thing as cheap oil in the future, because of the steadily growing demand in such emerging markets as China and India.

ABU DHABI, March 5 (RIA Novosti) - OPEC ministers will opt to keep crude output unchanged at their meeting in Vienna on Wednesday, the Saudi oil minister told a national newspaper. The U.S., the world's largest oil importer, has called for a production rise to ease its economic difficulties. Al-Hayat quoted Ali al-Naimi, the most influential minister in the cartel, as saying: "The situation on the oil market is stable. There is no need to interfere with the market." The world oil price hit a record high of $103.95 per barrel on Monday as speculative investors tried to find a safe haven for their money as the U.S. dollar continued its decline. However, oil prices dropped at the end of the session on news of resumed oil deliveries from Nigeria. The Saudi minister told the paper that the rise in oil prices was caused by an unprecedented speculation in oil futures and was unrelated to market fundamentals. OPEC ministers, whose countries account for 40% of global oil output, will be holding their 148th meeting.