Oil, terrorism and drugs intermingle in Colombia
As part of efforts to diversify its oil supply the U.S. is intensifying its military involvement in Colombia, the third most populous country in Latin America after Brazil and Mexico. Colombia is one of Latin America's most unstable countries; an estimated 3,500 people, mostly civilians, are killed annually and thousands of others tortured and extorted. Several guerrilla bands, left and right-wing, control about a third of the country making about $600-700 million a year in cocaine-related protection profits.

Arauca province is a petroleum rich area in northeastern Colombia near the Venezuelan border. In recent months, terrorist groups in this region - primarily the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN) - have attacked the first 75 miles of the 480-mile Caño Limón-Coveñas oil pipeline, notoriously known as "the flute." In addition to attacks on the pipeline, the region has become Colombia's most violent province; car bombings, assassination of government officials and forced displacement of rural dwellers in untold numbers are a matter of routine. As with narcotics, terrorist groups use oil to facilitate their violent activities. They extort and threaten oil companies, sabotage their operations when payments fail to arrive, and in other cases steal gasoline and sell it on the black market. The profits are used to finance more of the same and fuel a decades-old conflict that has already cost Colombia thousands of lives and billions of dollars.

Colombia is the third-largest recipient of U.S. military aid, following Israel and Egypt. U.S. aid commenced under President Bill Clinton within the framework of Plan Colombia, intended to fight the drug trade, but now part of this aid will be directed toward protection of oil facilities. The threat to Colombia's oil prompted the Bush administration to initiate a pipeline protection plan intended to train, equip, and assist two elite Colombian army battalions of up to 800 soldiers to defend the pipeline against terror attacks. About $140 million are likely to be allocated to provide munitions, equipment, and training to the Colombian army in fiscal year 2004. Roughly seventy members of the U.S. Army's 7th Special Forces Group are already in Arauca providing counter-insurgency training to Colombian troops.

U.S. Ambassador to Colombia Anne Patterson recently stated that the pipeline plan reached beyond the anti-narcotics mission to which the U.S. has been committed and that it is, in fact, designed to increase U.S. energy security. "Colombia has the potential to export more oil to the U.S, and now more than ever, it's important for us to diversify our sources of oil," the ambassador said.

It is unclear whether Colombia's oil potential justifies the risk of military involvement. Colombian crude represents a mere two percent of total U.S. oil imports. The country has a potential capacity of roughly 800,000 barrels per day (bpd) but pipeline attacks and natural depletion of fields reduced output to 600,000 bpd. Colombia's proven reserves of 1.8 billion barrels amount to 0.2% of global reserves. Projections of potential reserves indicate that more oil may be discovered but it is premature to assess whether Colombia may emerge as a major oil supplier to the U.S.

U.S. military involvement in Colombia presents several risks. First, by attempting to protect the oil pipeline, the U.S. risks being dragged into a conflict that is more complex and deep-rooted than most people realize. This could be to the detriment of U.S. national interest. Commanders of one of the main groups, the National Liberation Army, have already called the presence of American troops an act of aggression and threatened to target them.

Second, troops from the Colombian Army's 18th Brigade in Arauca responsible for fighting the terrorists with U.S. guidance have so far failed to bring peace and stability to the region. On the contrary, many of them have been accused of having ties with the paramilitary groups, being notoriously abusive, and violating fundamental rights of Arauca's inhabitants. This could instill a sense of anti-Americanism among Colombia's impoverished people who might identify the U.S. as an accomplice to these misdeeds.

Third, U.S. involvement in Colombia sets a dangerous precedent in terms of U.S. government protection of U.S.-based firms' overseas commercial interests. Forty-four percent of the shares of Caño Limón-Coveñas oil pipeline are held by Los Angeles-based Occidental Petroleum. U.S. companies operating in other restless global regions might demand similar federal government protection. As it is, the U.S. military is employed in dozens of missions throughout the world from Iraq to Afghanistan to Korea to the Balkans and cannot provide protection services to oil companies under the guise of "guarding U.S. energy security interests."

Despite all this, one underlying reason might justify U.S. military involvement in Colombia: the country's link to international terrorism. According to many reports the drug war has been folded into the war on terror. "Narcotraffickers" are now "narcoterrorists," says Robert Kaplan, one of the nation's leading foreign affairs journalists who was embedded with four different U.S. Army Green Beret regiments in Colombia. During the 2003 Pitcairn Trust Lecture held on April 9 at the Foreign Policy Research Institute, Kaplan noted "some of the most violent parts of Colombia are on the Venezuelan border, where President Hugo Chavez has given these criminal groups rear bases while inviting Arab criminal and terrorist gangs into the islands off the Venezuelan coast."

There have already been documented links between Colombian terrorist groups and terrorists based elsewhere (specifically IRA,)  and as Kaplan notes there are signs  of  a  possible relationship of  convenience with  Al Qaeda. Kaplan says that the Colombian terrorists are much more highly developed than many others in Latin America: "They are so inventive in Colombia that they set up roadblocks where one must show ID so they can check your name against a computer database, which can take days, to see if you are worth kidnapping."

Colombia is one of the classic cases of collapsed state in which terrorism, crime, drugs and oil intertwine. Though its oil endowment is probably too small to be a major source of U.S. oil, it should be closely watched; the U.S. cannot afford to let Colombia turn into the western hemisphere's primary terrorist safe haven.

More info:
Colombia Monitor: Protecting the Pipeline: The U.S. Military Mission Expands
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Japan's struggle to secure future oil supply
After the U.S., Japan is the world's largest oil importer. Japan imports most of its oil from the Middle East (88.4% in 2001.) In an effort to secure its energy supply, Japan has been pursuing a $2.8 billion deal with Iran to develop oil at Azadegan in the oil-rich Khuzestan Province where an estimated reserve of six billion barrels is located.

Japanese officials, reported the Economist, were warned by the U.S. that Japanese consortiums might be punished with sanctions were they to sign the Azadegan deal. Richard Boucher, U.S. State Department spokesman, said this was a "particularly unfortunate time" to be striking deals with Iran.

The U.S. opposes the oil deal for two reasons. First, it would strengthen Iran's economy, rolling back the efforts by local opposition to undermine the ruling clerics, whose Islamic regime is described by the State Department as the world's "most active state sponsor of terrorism." Second, oil revenues may be used for Iran's nuclear program, which the U.S. believes masks efforts to develop nuclear weapons. Just last month Iran equipped its elite revolutionary guards with a locally made ballistic missile - the Shahab-3 - capable of carrying a nuclear warhead and reaching U.S. forces stationed in Saudi Arabia and Turkey.

The strong American opposition puts Japan in a delicate position. Japan is reluctant to compromise its relations with the U.S, on which it depends for both its economy and its security, by enriching a country its ally considers a threat. Japan needs the U.S. to serve as a deterrent to a nuclear armed North Korea and must be sensitive to U.S. concerns regarding Iran's nuclear capability (it's worth noting that Iran's Shahab-3 is based on the design of North Korea's No-dong ballistic missile.)

Unlike the U.S, however, Japan maintains diplomatic and economic relations with Iran - in fact, Iran is its third-largest supplier of oil.

On July 1, Japan suggested a compromise aimed at securing the deal while allaying American concerns: Japan would sign the deal if Iran would sign an additional protocol to the Non-Proliferation Treaty allowing for surprise visits to suspected nuclear sites. Iran refused. Two days later, Japan announced the deal would be "prolonged" while concerns about Iran's nuclear program were addressed. Iran responded by playing down Japan's decision. As of this writing it is not yet clear if the deal will fall through, but there are signs that due to Iran's difficult economic problems some influential Iranians are coming round to the idea of signing the additional protocol. Iranian Oil Minister Bijan Namdar Zanganeh has said Iran and Japan are close to an agreement despite U.S. objections.

Were the deal to fall through, Chinese, Indian and Russian oil and gas companies would likely compete over rights to develop Azadegan. China Petroleum & Chemical Corp., known as Sinopec, has announced it is "more willing than ever before'' to enter into joint ventures with Iran. India's petroleum ministry, for its part, announced that India will be "perfectly happy" if given the field.

The obstacle to its deal with Iran comes at a pivotal moment for the future of Japanese oil supply. Due to its excessive reliance on the Middle East, Japan has sought to diversify its sources of oil, looking particularly to Russia. However, Japan's Russian prospects plummeted in May, when China's National Petroleum Corporation (CNPC) signed a $150 billion preliminary agreement with the Russian company Yukos to pump oil from Siberia to Daqing. Japan, which had proposed a pipeline from Siberia to Nakhodka (a port in Russia's Far East,) had been competing with China for the deal.

Despite initial press reports indicating that the Sino-Russian deal was final, Japan has not surrendered the field. It has continued to send officials to Moscow to plead its case, and its labors might bear fruit. Two days after CNPC and Yukos inked the deal during a state visit by Chinese President Hu Jintao to Russian President Vladimir Putin, the Russian leader emerged from a meeting with Japanese Prime Minister Junichiro Koizumi and announced that neither possibility had been ruled out. Three weeks later, Putin indicated that he actually preferred Nakhodka, because oil could be transported from there not to either China or Japan but to both, and to the entire Asia-Pacific region, as well. During a June 28 visit to Vladivostok, Japan's Foreign Minister boosted an offer made in mid-April to help Russia develop oil fields in Western Siberia in exchange for the Nakhodka pipeline. This story continues to develop.

Also see:
Japanese Government: Fundamental Philosophy of Japan's Oil Policy
Japan and the Middle East: Signs of Change?
Chinese Oil Demand and the Middle East
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Chad-Cameroon pipeline project put to test
Experimental pumping of oil through the Chad-Cameroon pipeline has begun. The pipeline, single largest private sector investment in sub-Saharan Africa, stretches 650 miles from the Doba basin oilfields in southern Chad to export facilities located offshore Kribi, Cameroon, in the Gulf of Guinea.

According to the World Bank, the project, undertaken by ExxonMobil, Petronas of Malaysia, and Chevron and partially financed by the World Bank Group, could result in nearly $2 billion in oil revenues for Chad and nearly $500 million for Cameroon. Others estimate Chad will receive as much as $3.84 billion in the first ten years of production alone, and perhaps $5 to $6 billion over the span of the project.

Human rights activists and international institutions are concerned the influx of oil revenue will serve to exacerbate the two countries' chronic problems. Both countries are rated "Not Free" by Freedom House.

Chad's government's human rights record is abysmal. The population has endured numerous incidents of extrajudicial killings, arbitrary arrest and detention, and media repression. The average income of its 7 million people is less than $1 per day and there is a history of tension and conflict among the populations of the Doba Basin region in southern Chad where the oil fields are located. The World Bank described Chad's institutional weakness as "all encompassing and greater than in most sub-Saharan African countries, reflecting the impact of almost three decades of civil strife."

In testimony before the U.S. House of Representatives Subcommittee on Africa, Peter Rosenblum, Director of the Human Rights Program at Harvard Law School, noted, "It is relevant to take into account the ethnic and religious divisions-the Arabized Muslim north, the Christian animist south. Chad is not Sudan. It is not Nigeria. But there is much in common, including the risk that a militarized north is going to become dependent on a disenfranchised south."

Cameroon, for its part, is one of the most corrupt countries in the world and its human rights record is far from clean. It ranked first in Transparency International's corruption perception index in 1998 and 1999. The World Bank said in 2001 that the country "has a track record of endemic corruption."

With such bad record of governance it is doubtful whether the two countries will be able to manage their petrodollar wealth.

Both countries have imposed apparently stringent measures to control the flow of money. Chad's parliament has passed legislation calling for 80 percent of the oil revenue to go to the country's health, education and infrastructure. Oversight committees have been established in both countries to monitor the management of oil revenues. However, Rosenblum noted, "the government of Chad has failed to demonstrate the necessary good will to enable the oversight committee to play the role that it could play under the law," specifying among other examples that "the government refused to allocate space or to allocate a budget to the oversight committee so that it could operate."

The World Bank effort on the Chad-Cameroon project is an innovative experiment designed to reduce poverty and improve transparency in Africa. Only time will tell if Chad and Cameroon were prepared for such a project. If the project proves successful then it could be replicated in other parts of the developing world. But a report by the Catholic Relief Services expresses doubt that this would be the case: "Very special circumstances led to the Chad-Cameroon Project. Chad is landlocked, requiring massive investment to bring the oil to market. It is extremely poor, making the leverage of the World Bank particularly strong prior to the oil boom. Because of the criticism heaped on companies operating in Sudan during its war, foreign oil companies decided that they could not go forward in conflict-ridden Chad without World Bank participation and strong conditionalities. This is in stark contrast to Equatorial Guinea, where oil is offshore and the companies decided they did not need World Bank participation. This combination of factors may not be seen again."
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Natural resource curse hits São Tomé
Before oil was found in São Tomé and Principe, the two-island country of 1,000 square miles on the Equator in the Gulf of Guinea, its 160,000 people relied mainly on fishing, cocoa, bananas and aid. The average annual income was $280. With the first signs of oil, the former Portuguese colony began facing the same problems characterizing most natural resource producers.

Seismic data suggests the offshore blocks in the Gulf of Guinea could hold between four and 11 billion barrels of reserves at depths of between 1-1.5 miles. Neighboring Nigeria has a treaty with São Tomé establishing a joint development zone in waters off the shores of both countries. Under this deal, 60 percent of the revenue from the area would go to Nigeria and the rest to São Tomé. Big oil companies such as ExxonMobile, ChevronTexaco and Royal Dutch/Shell have expressed interest in bidding for exploration licenses that would pour millions of dollars into the islands. The oil will take a long time and substantial investment to extract and is unlikely to reach the market before 2007 or 2008. But arguments over oil revenues have already fuelled political and social disputes in recent months.

Since September 2001, four prime ministers have been fired. The army and the political and business elites sense the promise of the oil windfall and want a part of it. This was the background for a bloodless coup by a military junta under Fernando Pereira that took place on July 16. Pereira told state television his first televised appearance after the coup that his men acted because of the "incompetence and corruption'' of successive governments which had left São Tomé in "extreme poverty.'' São Tomé's ousted leader Fradique de Menezes, in neighboring Nigeria at the time of the coup, had a different story. "It's because of oil that they want to take over power," he said, calling those who unseated him "small groups of oil-smelling people."

de Menezes called the international community to put democratic order back in the country and indeed the coup leaders faced the threat of possible military action by African states intent on reversing the grab for power. The U.S, the UN, Portugal and the 53-member African Union all condemned the coup. Nigeria, the world's eighth largest oil exporter, was the country most involved in efforts to stabilize the situation in São Tomé. International pressure prevailed and the week-long coup crisis finally ended with an agreement negotiated in Gabon between the coup leaders and international envoys, calling for the formation of a new government - with de Menezes remaining president - and political guarantees that de Menezes respect the separation of powers between the presidency, parliament and other state institutions. The coup leaders were granted amnesty.

Though the coup ended, São Tomé problems are only beginning. It is going to get a lot of money and it lacks the political and financial institutions or the infrastructure to manage such amounts. A lot of money could disappear into private pockets, and that will likely fuel unrest.

Also see:
Africa Drowns in a Pool of Oil
West African Oil: Hope or Hype?
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Fuel Cell Locomotive for Military and Commercial Railways
An international consortium is developing the world’s largest fuel cell vehicle, a 109 metric-ton, 1 MW locomotive. The five-year project, which commenced 27 May 2003, will develop and demonstrate the first fuel cell-powered locomotive for military and commercial railway applications.

The project was conceived, organized, and is led by Vehicle Projects LLC of Denver, USA, and is funded and administered by the US Army Tank-automotive and Armaments Command (TACOM), National Auto-motive Center (NAC), Warren (MI), USA, via prime contractor Jacobs Engineering Group Inc, Pasadena, USA.

The first phase of the project includes (a) comparison of the cost-benefit, performance, safety, and marketability of fuel cell locomotives with diesel-electric and electric (trolley) locomotives, (b) determination of the best fuel cell-locomotive fuel, along with fuel production methods and the potential for renewable fuel, (c) determination of the best fuel cell type, and (d) conceptual design of controls, sensors, packaging, and refueling. Available funding for Phase 1 is US$1 million, which covers all oversight, management, and execution costs. Estimated total cost of the five-year project is US$12 million.

Vehicle Projects previously developed and demonstrated a fuel cell mine locomotive and is also developing a 23 metric-ton, 100 kW fuel cell battery hybrid mine loader, both projects supported by the US Department of Energy and Natural Resources Canada.

Regarding fuels under consideration, also see:
DOE: Clean Coal-to-Methanol project a success
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Fuel cell power plant installed at NJ Sheraton
FuelCell Energy, Inc. and its U.S. distribution partner, PPL EnergyPlus, a PPL Corporation subsidiary, announced the installation of a clean and efficient Direct FuelCell® (DFC®) power plant for Starwood Hotels & Resorts, one of the world's largest hotel and leisure companies.

The DFC300A power plant will provide 250 kilowatts of electric power as well as heat to the Sheraton Edison Hotel - Raritan Center in Edison, New Jersey. The fuel cell system provides about 25 percent of the hotel's electricity and hot water.

"We are thrilled that our first hotel application of fuel cell system technology has been completed and are pleased to be working in conjunction with PPL on this important initiative," said John Lembo, Director of Energy for Starwood, adding, "fuel cell technology will...reduce the hotels' overall energy costs."

PPL will install two other DFC300A power plants in New Jersey this year, one at the Sheraton Parsipanny Hotel and one at Ocean County College in Toms River. PPL has already installed three other DFC300A power plants at end user sites, including Air Station Cape Cod in Bourne, Mass. and two at Zoot Enterprises, a credit processing company in Bozeman, Mont. Currently, DFC-based fuel cell power plants are operating at 15 locations throughout the world and have generated over 12 million kilowatt hours at customer sites.

FuelCell Energy Inc. is developing Direct FuelCell® technology for stationary power plants with the U.S. Department of Energy through the National Energy Technology Laboratory, whose advanced fuel cell research program is focused on developing a new generation of high-performance fuel cells that can generate clean electricity at power stations or in distributed locations near the customer, including hospitals, schools, universities, and other commercial and industrial applications. Allentown, Pa., headquartered PPL controls about 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity to customers in Pennsylvania, the United Kingdom and Latin America.
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Fuel cell scooters for Europe and China
Palcan Fuel Cells, developer and manufacturer of proton exchange membrane (PEM) fuel cells and metal hydride hydrogen storage products, announced the integration of its 2 Kw fuel cell stack system in a fuel cell powered scooter designed to address the world's need for a low-end mass transport vehicle.

Palcan's prototype power supply is aimed at the market for smaller internal combustion engines (ICE) developed for two and three wheeled applications. These include rickshaws, small transport vehicles and scooters. Market survey reports estimate European production at 24 million two-wheeled scooters annually. In Asia, the market dwarfs that number.

Palcan received support for the deployment of an alternative transportation solution from the Shanghai Municipal People's Government Economic Commission (MPG). The Canadian National Research Council and MPG are acting as sponsors of the joint venture development agreement.

Also see:
Sino Sphere Journal: The future of China's transportation sector
Yamaha Motor to develop methanol fuel cell for small motorycles
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U.S. Air Force to get fuel cell bus
The State of Hawaii’s High Technology Development Corporation (HTDC) has awarded contracts to develop new technologies for heavy-duty mobile fuel cell applications and integrate these and other technologies into a fuel cell powered thirty-foot hybrid bus to be stationed at the Hickam Air Force Base in Hawaii. Contracts were awarded to Enova Systems, a California based developer and manufacturer of mobile and stationary electric, hybrid and fuel cell digital power management systems, and to Hydrogenics Corporation, a Canada based firm engaged in the commercialization of fuel cell technology and test stations for fuel cells.

The initiative is funded by the U.S. Air Force to evaluate advanced ground transportation technologies. Hydrogenics will supply a fully integrated 20 kW fuel cell power system and related peripherals. Enova will develop several new components including a Dual 8kW inverter, a 380V DC/DC converter, additional software development for Enova’s already proven, successful Hybrid Control Unit and a Mobile Fuel Cell Generator that incorporates a Hydrogenics Corporation’s 20kW Fuel Cell Power Module.

This program follows several successful advanced technology efforts between the State of Hawaii and Enova including fast charging, electric powered Hyundai SUVs, an electric 120kW thirty-foot bus (also at Hickam) and a multi-car tram system. "The Air Force is excited about deploying fuel cell technology," said Carl Perazzola, Chief, Advanced Power Technology Office, Robins Air Force Base, adding, “We are looking forward to baseline the performance of this bus and accelerate fuel cells to commercialization."
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