April 21, 2003

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Geopolitics of Oil
Threats to Oil Transport

Forbes: "Dangerous Liaisons" - Oil Companies and dictatorial regimes.

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View our online presentation:  The Changing Geopolitics of Oil

Oil prices fall and rise
Oil prices fell briefly after the rapid victory of US-led coalition forces in Iraq. Coalition success in quickly seizing Iraqi oil fields prevented Saddam Hussein loyalists from setting oil wells afire as was done to Kuwaiti oil fields during the first Gulf War, and enabled coalition firefighters to put out the oil fires that analysts had feared would greatly damage Iraq's ability to resume production. The drop in prices was of great concern to the Organisation of Petroleum Exporting Countries (OPEC,) which in response called an emergency meeting on April 24. OPEC president, Abdullah al-Attiyah, Qatar's Minister of Energy and Industry said: "My main worry is how to deal with the dramatic price drop. The market is full of oil, it's facing a glut not a shortage." Prices topped $30 a barrel after Iranian Oil Minister Bijan Namdar Zanghaneh called on OPEC to ward off a price collapse by reducing production in the second quarter of 2003 and Indonesian Mines and Energy Minister Purnomo Yusgiantoro said he would ask OPEC to reduce daily production by 1.5 to two million barrels. Iran is OPEC's second biggest producer after Saudi Arabia. Gas prices at the pump follow the price of crude with a several week time delay. Prices dropped in response to the fall in crude oil prices, but are likely to rise again if the rebound in crude oil stands.

Oil pipeline in Nigeria blown up by militants
On April 7, a few days after ethnic militants threatened to destroy property belonging to multinational oil companies in the Niger delta, an area that accounts for most of Nigeria's crude output of two million barrels per day, a major oil pipeline that carried crude oil from ChevronTexaco's Escravos oil terminal to a refinery in the southern port of Warri and another in Kaduna, 450 miles to the north, was blown up. Since then, ChevronTexaco as well as other major oil firms who evacuated Nigeria in recent months following fighting between Nigerian soldiers and rival militants from the area's two major ethnic groups, the Ijaw and Itsekiri tribes, have resumed production. The tribal warfare had shut down about 40% of Nigeria's total oil output, cutting production by 800,000 barrels per day (bpd), however with hope of improved security, production at ChevronTexaco's Escravos oilfield is back up to about 310,000 bpd, 130,000 barrels short of capacity, while Royal Dutch Shell's Forcados field has returned to 350,000 bpd production, 150,000 bpd below capacity.
Throughout Nigeria over 10,000 people have died in ethnic, religious and political violence since President Olusegun Obasanjo's election in 1999 ended 15 years of military dictatorship. April 19 Nigeria faces elections. Thus far Nigeria has not had a successful democratic transition from one civilian government to the next. "We are on the edge of an abyss. These elections will decide our fate,'' presidential contender and longtime human rights campaigner Gani Fawehinmi said. "I only hope our democratic process will survive.''  China whose energy consumption is growing at a phenomenal rate, is planning to begin importing Nigerian oil.
Nigeria, the fifth largest exporter of oil to the United States, is one of the world's poorest countries. Two thirds of Nigerians live on less than $1 a day.  The country lacks refining capacity, and thus imports over half the gasoline it requires. Nigerians suffer from chronic gasoline shortages, waiting habitually in half mile lines for gas. According to Transparency International, Nigeria is the world's second most corrupt country after Bangladesh. Last August Nigerian oil concern Malabu Oil & Gas, controlled by the former military regime's petroleum minister, Dauzia Loya Etete, sued Shell for $1 billion, accusing it of colluding with Nigerian officials to grab Malibu's license to prospect oil in the Niger Delta.

Oil related indictments
A former Mobil senior executive who was in charge of overseas crude-oil transactions in Kazakhstan, and the CEO of Mercator Corp., a New York-based merchant bank, were indicted following a three-year Justice Department probe into alleged bribes paid during the 1990s to Kazakhstan's dictatorial President Nursultan Nazarbayev and senior members of his administration on behalf of U.S. oil companies ExxonMobil, ConocoPhillips and Amoco, now part of British Petroleum (BP). Their lawyers deny the allegations. Payments from Western oil companies have made Nazarbayev, the first and sole president of the former Soviet republic, and former first secretary of its Communist Party, a billionaire and reportedly one of the world's 10 most wealthy men. Freedom House rates Kazakhstan as Not Free. As Seymour M. Hersh notes in "The Price of Oil," a detailed account of the incident, the investigation started following accusations by Farhat Tabbah, Jordanian businessman, that he was cheated out of millions of dollars in commissions on what was to have been a ten-year swap of oil between Kazakhstan and Iran. United States federal sanctions prohibit American oil companies to trade with Iran or facilitate such trades without a license from the Treasury Department.

French oil giant Elf Aquitaine funds 'went to French parties'
During the corruption trial in Paris of 37 Elf executives accused of embezzling hundreds of millions of dollars, Alfred Sirven, a key defendant, testified that a large portion of the $50 million he withdrew in cash between 1990 and 1996 were used to fund French political parties and foreign leaders. Over $150 million were allegedly embezzled from Elf Aquitaine in the early 1990s. Former Elf president Loik Le Floch-Prigent, appointed by President Francois Mitterrand in 1989 to run the company that was then state owned and is now a part of TotalFinaElf, said French politicians would personally collect envelopes with company cash to finance their campaigns. Le Floch-Prigent testified that initially the payments went to Jacques Chirac's party, at the time called the Gaullist Rally for the Republic (RPR), until then-President François Mitterrand, a Socialist, "asked me to balance things out so that other parties would profit." Chirac succeeded Mitterrand as president in 1995. According to Le Floch-Prigent payments totaled about $5 million per year, but Sirven testified: "This seems to me a gross under-estimate." Le Floch-Prigent said Andre Tarallo, known within Elf as "Mr. Africa," paid parties on the right side of the political spectrum, while Sirven funneled payments to those on the left.
French leaders are believed to have used Elf to expand French influence in Africa. Millions of dollars in payments by Elf were made to African leaders with whom Elf did business. Mitterrand's foreign minister Roland Dumas, accused of benefiting from Elf money but acquitted, said Elf "gradually turned into a cash-cow. Its capital was used to reward African heads of state." Lawyers want the government to lift a ruling classifying the names of senior politicians who took such money as a defense secret.
Nadhmi Auchi, an Iraqi born billionaire and British national, was arrested in the UK and faces extradition to France for his alleged role in funneling a £28 million kick-back to purchase an oil refinery from its Kuwaiti owners. The UK Observer alleges that Auchi, who along with Saddam Hussein was tried for his involvement in a conspiracy to assassinate an Iraqi prime minister in Baghdad in the 1950s, built his financial empire by peddling his influence with Hussein's Baathist regime.
In 2001, TotalFinaElf signed an agreement with Iraqi dictator Saddam Hussein allowing the firm to develop 25 per cent of Iraq’s oil fields. TotalFinaElf largest single shareholder, Canadian Paul Desmarais', youngest son Andre is married to Canadian Prime Minister Jean Chretien's daughter France. Desmarais son Paul Jr., CEO of Montreal Power Corp., a firm whose annual revenues exceed 18 billion Canadian dollars, sits on the French oil company’s board of directors.

Unocal can stand trial for benefiting from Burma's slaving regime
A California appeals court has cleared the way for Unocal Corp, a global oil company, to stand trial in Los Angeles over accusations it shares responsibility for the murder, abuse and enslavement of villagers by troops guarding a $1.2 natural gas pipeline project in Burma (Myanmar) owned by Unocal, TotalFinaElf, a Thai company and a Burmese state-owned energy company, starting at least as early as 1995. The lawsuit alleges villagers were forced to work without pay by soldiers guarding the pipeline, abused, and in the case they refused to work or were too weak, shot. Soldiers are accused of pushing a mother and baby into a fire in which the baby suffered burns that caused his death.
According to Forbes, among the evidence is a cable from the U.S. embassy in Rangoon describing a conversation between a State Department official and Joel Robinson, a Unocal manager, in which Robinson acknowledged that Unocal hired the military as security and met directly with the soldiers to keep them informed of its activities so they could secure the area.
A federal court noted last September that "The evidence also supports the conclusion that Unocal gave 'encouragement' to the Myanmar military in subjecting plaintiffs to murder, r-pe and torture." Unocal denies the accusations.

Iraq to Syria oil pipeline shut
Following White House statements that Syria is a terrorist state providing haven and support to terrorist organizations such as Hizballah and to members of Iraq's deposed Ba'ath regime, and concealing weapons of mass destruction, the U.S. Army shut a pipeline that funneled oil from Kirkuk in northern Iraq to Syria's Banias port. That pipeline, re-opened three years ago, and a newer second pipeline, carrying oil from Ain Zalah in Iraq to Suwaydiyah in Syria, together supplied 200,000 barrels of oil per day to Syria at a great discount, doubling Syrian exports so that it reaped an estimated extra $1.2 billion annually, and enabling Iraq to circumvent sanctions and sell oil outside the U.N.'s oil-for-food program (dubbed oil-for-palaces by U.S. General Tommy Franks,) earning Saddam Hussein an extra $1 billion per year. Syria refined the Iraqi oil it purchased for domestic use, and exported its own oil at market prices.

News from the technology front

DaimlerChrysler's fuel cell powered minivan featured in Pentagon display
DaimlerChrysler's Town & Country Natrium, a fuel cell concept vehicle that runs on clean, nonflammable, and recyclable sodium borohydride fuel, participated in a ride-and-drive display program at the Pentagon on April 21. The vehicle has a range of 300 miles. Sodium borohydride is made from sodium borate, commonly known as borax, a mineral abundantly available in the Western United States. Hydrogen is extracted from sodium borohydride to power the fuel cell. "Chrysler Group has a long and proud history of supporting our national defense efforts," said Bernard I Robertson, DaimlerChrysler's Senior Vice President, Research and Regulatory Affairs. "This unique technology could have great benefits for the military: in particular, it is nonflammable, greatly improving safety in battle zones, and the main ingredient can be transported as a dry powder, dramatically reducing the enormous logistical demands of fueling our military in advanced battle settings. In addition, the greater fleet fuel efficiency would greatly reduce the amount of fuel used by our armed forces -- fuel that can cost hundreds of dollars per gallon to deliver to the battlefield. And this technology produces zero smog-forming and greenhouse gases, contributing to a cleaner environment. Finally, sodium borohydride has the potential to reduce or eliminate our dependence on oil for our transportation needs."

Millennium Cell to demonstrate Hydrogen on Demand in water taxi
Millennium Cell's Hydrogen on Demand(TM) system generates hydrogen from sodium borohydride, as described in the previous entry. Millennium Cell, has teamed up with Seaworthy Systems and Duffy Electric Boat Company in a demonstration project for California's Center for the Commercial Deployment of Transportation Technologies (CCDoTT) to show the utility of hydrogen fuel for generating power for ships and facilities in ports.The first boat is expected to be in use in Newport Beach (CA) harbor in August of this year. The Millennium Cell Hydrogen on Demand(TM) system will be installed in a 22-passenger water taxi from Duffy Electric Boat Co. The water taxi will serve the public 10 to 12 hours daily. Seaworthy Systems will provide system integration and engineering for Millennium Cell's technology.

Delphi Exhibits Solid Oxide Fuel Cell Technology
Delphi Corporation exhibited its Generation-2 solid oxide fuel cell (SOFC) at the above mentioned U.S. Department of Defense April 21 event. " Delphi is showing its next generation SOFC that has the ability to use alternate fuels and is designed to work with special fuel used by the military (JP-8 logistics fuel)," said Dr. Jean Botti, chief technologist, Delphi's Dynamics and Propulsion Innovation Center. "Delphi's SOFC includes increased power density for the military in a lightweight package. It also gives soldiers more autonomy in the field, because along with generating electricity, it produces potable water after filtration." Delphi's SOFC is multi-fuel capable using many hydrocarbon fuels and hydrogen along with diesel fuel and logistics fuel (JP-8) that are both required for military applications. It can be operated independently of a vehicle's engine for silent power or in conjunction with an engine for emissions reductions through use of the engine's reformed fuel. It produces water in the exhaust that can be condensed and filtered to support drinking water needs of military field personnel.

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