Power Plays: Exxon 'Seeking To Damage' Venezuela

WORLD ENERGY WATCH

The World Energy Watch presents recent news and analysis highlighting the activities of the players involved in the power struggle for the world's remaining energy resources.  

1//Al Jazeera, Qatar
EXXON ‘SEEKING TO DAMAGE' VENEZUELA

Hugo Chavez, Venezuela's president has accused the oil giant Exxon Mobil of wanting to damage his country after it won a court order to freeze $12 billion of the nation's energy assets.  The ruling was the first victory for the world's largest oil company in their battle for compensation over last year's nationalisation of one of their projects.  "You have a multinational, imperialist company trying to damage our flagship company." Chavez said on Saturday.  "But this ship will keep sailing and sailing full of oil," he told a meeting of farmers.  Exxon Mobil, which last week reported the largest ever profit of a US company, sought the freeze to guarantee repayment from Venezuela should it win arbitration over the compensation.  The court ruling means that PDVSA, the state oil company, cannot sell certain assets or move some funds while the compensation case is reviewed.  PDVSA is the main source of income for Chavez's government.  Following the court order, the nation's debt values plunged because of investor worries it could limit the activities of the PDVSA and affect its cash flow.  The Venezuelan company, which has more than $90 billion in assets, finances Chavez's spending on food subsidies, schools and clinics for the country's sizeable poor population.  PDVSA has suffered repeated refinery outages, struggled to improve production and shown signs of cash flow problems in the last year.  Venezuela says the court rulings are temporary and will have no impact on PDVSA's supplies, operations or finances. 

It plans to file a response this week to have the rulings reversed.  

2//OttawaCitizen.com, Canada
VENEZUELA THREATENS TO STOP US OIL SALES OVER EXXON 

President Hugo Chavez on Sunday threatened to stop sending oil to the United States unless it halted an "economic war" that he said included an Exxon Mobil lawsuit freezing $12 billion in Venezuelan assets.  The anti-American leader of a major crude exporter to the United States also warned that such U.S. aggression could cause world oil prices to spike to $200 a barrel.  Oil prices rose this week in part because of the self-styled socialist revolutionary's dispute with the largest U.S. company over compensation for Chavez's nationalization last year of an Exxon Mobil Corp project. Chavez on Sunday threatened to stop sending oil to the United States if it continued to attack Venezuela as he said it had done through an Exxon Mobil lawsuit that has frozen the assets of the OPEC nation.  The administration of President George W. Bush has distanced itself from the Exxon legal offensive, in which the oil company won international court orders freezing assets of the state oil company PDVSA.  "If you freeze us, if you really manage to freeze us, if you damage us, then we will hurt you. Do you know how? We are not going to send oil to the United States, Mr. Bush, Mr. Danger," Chavez said on his weekly TV show.  "Venezuela will join in your economic war and other countries will be with us in the economic war," added the ally of oil producers such as Iran and Ecuador. 

3//CNNMoney.com, US
OIL SECTOR'S PROBLEM IN REPLACING OIL RESERVES COULD WORSEN

Chevron Corp.'s (CVX) dramatically low 2007 reserve replacement announced last Friday may be the first in a series of disappointing results reported by major oil companies in the coming weeks. 

Chevron announced Friday that it replaced just 10% to 15% of its reserves in 2007, a rate lower than the already pessimistic 50% to 60% analysts estimated. And although Chevron's report is expected to be the weakest among the oil giants, analysts also expect ConocoPhillips (COP), Exxon Mobil Corp. (XOM), and Royal Dutch Shell PLC (RDSA) to report reserves replacement shy of 100%. BP PLC (BP), which reported 120% reserve replacement on Tuesday, has so far bucked the trend.  Although Wall Street has shown more tolerance towards weak reserve replacement in recent years, in part due to the industry's strong financial position, some analysts are losing patience with the under-performance. Reserves replacement remains a key benchmark that informs whether a company is replenishing its assets as it produces oil and gas.  "I try to look at the long term, but the biggest problem with Chevron is that it's the fourth year they are reporting disappointing rates," said Phil Weiss, equity analyst at Argus Research in New York. "It's time for them to offer something more tangible. I'm not throwing in the towel yet, but I have some concerns."  Chevron's Friday report followed three years of low rates. In 2004, the company broke its 11-year streak of replacing more than 100% of reserves while in 2005 it had a rate close to zero after discounting the reserves Chevron booked from its acquisition of Unocal. In 2006, the company replaced less than 80% of its reserves. 

4//Reuters.com, UK
IRAN TO PRIVATIZE $90 BLN OF ENERGY ASSETS: REPORT

Iran plans to privatize 47 firms in its energy sector worth $90 billion and set up a holding company for these assets which it will list on four international exchanges, a National Iranian Oil Company (NIOC) executive said.  The plan would see the oil and gas companies put under an umbrella group to attract foreign investment, Hojatollah Ghanimi-Fard, director of international affairs at NIOC told the London-based Middle East Economic Digest (MEED).  He said the firms would also be listed in Tehran by 2014. ... Iran, the world's fourth-largest crude exporter, tried to revive its stalled privatization plan in 2006 by ordering the floating of 80 percent of several firms. But it said the upstream oil sector and key banks would remain in state hands.  The 2006 list included NIOC subsidiaries, such as Petropars, set up in 1998 to help develop part of Iran's huge South Pars gas field and which has since signed energy deals in Venezuela.  Other NIOC subsidiaries included Petroiran Development Company and North Drilling Company. Firms affiliated to Iran's petrochemical industry were also on the list.  Deals have already been signed to list the holding company on markets in two of Iran's neighbors and two Asian countries, Ghanemi-Fard said, adding that more details would be given by the end of March. He declined to name the exchanges.  "Today, the valuation award is something close to a $90 billion book value, " Fard said. "But at the time they go to the stock market, based on the bidding you will see from those that want to buy it, the total amount will be more than that." 

5//Forbes.com, US
COAL PRICES MAY DOUBLE IN COMING YEAR

The devastating snowstorms in China plus floods in Queensland, Australia, further compounded by power crises in South Africa, may lead to world coal prices doubling in 2008-2009.  Primarily because of the amplifying supply-side pressure in the coal sector, Citigroup forecast that the annual contract price for thermal coal will reach $100 per metric ton in the 2008-2009 financial year, up from $55 per ton now, while the price of coking coal may also mount to $200 per ton from $95.  The tightening of the coal market, already squeezed by slower growth in Indonesian and Australian exports and stronger demand from Asia, has been further hit by bad weather in producing areas, which paralyzed processing and shipment from major coal mines.  Recent heavy rain and record flooding across central Queensland have resulted in substantial short-term disruptions to operations. At the Ensham mine, the 8 million metric ton per year thermal coal producer, the pit was flooded. Two million metric tons of thermal coal production will be lost. 

Coking coal production is likely to be even more severely affected, with many producers such as BHP Mitsubishi Alliance, a joint venture of BHP Billiton and Mitsubishi Development, warning that coal deliveries will be delayed and declaring force majeure on supply contracts. Citigroup estimated 4 to 5 million metric tons of coking coal output will be lost. 

Copyright 2008, Gloria R. Lalumia

WORLD ENERGY WATCH

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