Progress on PEMEX opening to foreign access

The PRI adjusted its platform to allow it to support private investment in PEMEX:

The centrist Institutional Revolutionary Party, or PRI, voted to drop from party principles the rule prohibiting private investment in Pemex, the state-owned oil monopoly, at an assembly on Saturday, the Reforma newspaper reported.

I had not considered that this covers not only foreign private investment, but domestic private investment as well.  In any event, hopefully this will allow progress on the re-invigoration of PEMEX.  The numbers on Cantarell have not been good.  Here is the June update; below 1 million bpd:

Daily production at Cantarell, which first began pumping oil in 1979, plummeted 36 percent in July to 973,668 barrels from 1.526 million, according to an Energy Ministry Web site.

But even this precipitous decline is not a surprise – see this item from 2004:

“Supergiant Cantarell continues to be the mainstay of Mexican oil production, with 2.1 MMb/d of output in 2003 up from 1.9 MMb/d in 2002. However, Cantarell is expected to decline rapidly over the next few years, falling as far as 1 MM b/d by 2008. This has given particular urgency to Pemex’s efforts to develop other fields and move into deepwater.” For now, Pemex’s best alternative project is the heavy-oil complex known as Ku-Maloob-Zaap, in Campeche Bay close to Cantarell. Output from this complex was 288,000 b/d in 2003 and is expected to rise to about 800,000 b/d by the end of the decade.” David Shields, “Pemex Ready to Drill in Deepwater Perdido Area,” Offshore, June 2004, p. 38

Even if PEMEX really kicks the exploration and drilling into high gear, I don’t think they will be able to replace the profitability of Cantarell.  Everything of much size will most likely be deepwater GOM , with much higher cost per barrel and shorter lifetimes of the fields.  The Mexican government better start lining up new sources of funds……

Pipeline flow restored

Flow in the BP pipeline that flows through Georgia (BTC pipeline), and that had been shut since a fire earlier this month, started back up. This must come as good news to Azerbaijan, which has seen many of its export pathways disrupted in the last month.

Production is increasing at BP’s Azeri oil field and all output is feeding the Baku-Tbilisi-Ceyhan pipeline, he said, declining to specify how much of the link’s 1 million-barrel-a-day capacity is being used.

Planning for sea level rise

In a move that might become more common in the future, the island nation of Kiribati is asking for help in planning the relocation of its population in the next few decades:

Tong said that worst-case scenarios show Kiribati will be submerged within a century. He told The Associated Press last week that all 94,000 Kiribati residents eventually will have to be relocated, probably within 60 years.

This is truly amazing – the loss of a whole nation, even a small island chain. It seems that New Zealand is the only country currently taking families, and in small numbers – below 100 each year. While it is a start, and heartening to see frank discussion far ahead of the curve, this effort will have to be stepped up in the future.

It is truly frightening to think of the masses that would have to be relocated even if sea levels rise 5 meters. Perhaps situations like this will help raise the awareness of the risk as well as streamline reposnses.

Georgian train burns

Forgot to post this earlier – a train carrying hydrocarbons apparently hit a mine and burst into flames in Georgia near Gori. Oddly enough, the report states that the damage was near the end of the train.

Georgian Public Television reported that the blast occurred near the end of the 30-car train, and that 10 cars were on fire. It showed that the other 20 cars had been uncoupled to prevent the flames from spreading.

If this really was mine, why wouldn’t the engine/lead cars set it off? Could it be that it was not a mine, but rather a rocket or remote controlled bomb. That might increase tensions a bit.

Iranian Nuclear Power

I had no idea that Iran apparently has a nuclear plant very close to going on-line. Story here.

Iran’s first Russian-built nuclear power plant in the southern city of Bushehr will become operational by the end of 2008, Moscow says.

Interestingly, reduced rainfall is given as a reason for the push for more nuclear power in Iran:

Iran plans to construct additional nuclear power plants as its growing population suffers from electricity shortage.

Caused by a dramatic drop in rainfall, the shortage has forced the country to adopt a rationing program by scheduling power outages – of up to two hours a day – across both urban and rural areas in the country.

Apparently the IAEA has been conducting spot inspections and found nothing amiss, but it appears that there is significant pressure from the US (and Israel) to slow down the startup. Here is another article that discusses a second nuclear plant that has begun design phase. In this article, the motivation for construction of nuclear power is to keep hydrocarbons for export:

Iranian officials say Iran, which sits on the world’s second biggest reserves of gas and oil respectively, wants nuclear energy so it can export more of its hydrocarbons.

It will be interesting to see if Russia pushes forward with its help to Iran in their nuclear program, especially with the ongoing Georgian crisis.

Future Drought Scenario

This article has a few interesting tidbits, but the most striking is the possibility of armed conflict between Pakistan and India over water in the future:

“India and Pakistan are both nuclear-armed countries. All of the agriculture in Pakistan and all of the agriculture in northern India depend on glacier-fed rivers that come off the Himalayas from the Tibetan plateau. Those glaciers are melting,” Dr Dyer said.

“They’re melting according to Chinese scientists to 7 per cent a year, which means they’re half gone in 10 years.

“India has a problem with this. Pakistan faces an absolutely lethal emergency because Pakistan is basically a desert with a braid of rivers running through it.

“Those rivers all start with one exception in Indian-controlled territory and there’s a complex series of deals between the two countries about who gets to take so much water out of the river. Those deals break down when there’s not that much water in the rivers.”

No explicit time estimates are given, just the suggestion that things that had been projected for around 2040 might be happening closer to 2010. Pretty sobering stuff.

Fannie Mae and Freddie Mac Fallout

It appears that some of the big foreign holders of the two FMs debt are getting a bit nervous:

“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.”

China’s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong. The Chinese government probably holds the bulk of that amount, according to McCormack.

Props to Bill Moyers

Recently I have watched several episodes of the Journal. This one was especially good, I thought. I definitely want to read the guest’s book, The Limits of Power.

Power Woes in Dominican Republic

Some of this can be traced to oil prices:

SANTO DOMINGO, Dominican Republic — Gloom has descended over this Caribbean nation as Dominicans endure blackouts with such frequency and duration that tempers are flaring and the economy is foundering.With blackouts lasting as long as 18 hours in some areas, angry residents have taken to blocking streets with burning tires and stones in protest, and police have respondent with tear gas that have even hit homes.

Authorities blame the blackouts on maintenance problems while residents blame the electric companies and government for inefficiency.

The electric sector has always suffered from poor maintenance, internal inefficiencies and a lack of operating funds due to negligent bill collection and illegal tapping of electric lines.

But the oil crisis has aggravated the problem: Daily blackouts can now last between 12 to 18 hours, causing disruptions across the nation.

Energy as Russia’s Achilles Heel???

Interesting article that claims that pressure can be applied to Russia on the energy front. The claim is that two large new pipelines that Russia plans depend on US allies, and perhaps they can exert pressure on Russia. Based on the support the US has given to Georgia, I am sure these countries will antagonize Russia!

In a nutshell, Russia understands that power in a large swath of the world — Europe, the former Soviet Union and parts of the Middle East — can be exerted from control of oil and natural gas pipelines. That’s how the U.S. has inserted its power into Russia’s backyard — through the Baku-Ceyhan oil pipeline that crosses the country of today’s conflict, Georgia. Now, Vladimir Putin intends to build on Russia’s restored power by erecting two gigantic new natural gas pipelines into Europe, which already relies on Russia for almost a third of its gas.

Here’s where the Achilles Heel comes in. One of these pipelines — South Stream — would pass through nations like Bulgaria, Hungary, Serbia and Austria. These are countries in which the U.S. has influence.

If the U.S. wants Russia’s attention, persuade these countries and others — for instance Germany, the main European partner on the second pipeline, called Nord Stream — to freeze their support for the lines until it’s satisfied that Georgia’s sovereignty is no longer compromised.