Oilisms

Well, you read it here first. The NI is up for a prize from Sonoma University in California for its piece on oil depletion in Pipeline cowboys ([NI 361](http://www.newint.org/issue361/index.htm)).

Oilisms was talking to a typical free market economist recently – in fact we can name him: Fatih Birol, the Chief Economist and Head of the Economics Analysis Division from the International Energy Agency. He maintains that ‘Saudi Arabia has to increase production by three million barrels a day by the end of the year, or we will face difficult times.’ Three million barrels a day? That’s an increase of over 33 per cent. By the end of the year? It is a total impossibility.

Production in the North Sea fields is falling at a faster rate than expected. Data will soon confirm that rather than a nice slow decline of around 7 per cent a year (the expected rate), output went down by 11 per cent in 2003. It is being called a ‘production waterfall’. For Britain this means more imports and lower tax revenues.

At a recent Berlin conference of geologists, statisticians and former oil executives belonging to the Association for the Study of Peak Oil, speakers from the major oil companies were invited to give their views about the decline in oil. The response in effect was: ‘Oil will go on for ever, don’t worry, everything is OK, buy a four-wheel drive.’

Before speaking, Jeffrey Johnson of Exxon (Operations Manager of Production Geoscience) asked all those with film cameras not to film him. When Oilisms asked him why, he said it was ‘because I’m not a very good public speaker’.

Another little bit of information that has not been making headlines is oilfield discoveries. They have not just dwindled, gone down a bit or slowed. They are at zero. Nil. Nada. A source told Oilisms that: ‘When the market digests the fact that despite all the new technology they can’t find a single new drop of oil, well, stick another zero on the barrel price.’

We were also speaking to a senior EU figure (who didn’t want to be named because ‘they will sack me’.) He was not hopeful about oil prices. ‘The oil companies are sitting on their oil, drip feeding it. Why pump it now – why not wait until it is $80 a barrel, then pump it? It makes perfect sense.’

Oilisms

Yet another oil man has been caught greasing palms: US banker and oil negotiator James Giffen. The head of the Mercator Corporation, a ‘boutique bank’ from Washington, this 62-year-old CEO has been charged with funnelling $78 million into accounts controlled by Nursultan Nasabayev – who just happens to be President of Kazakhstan – and Nurlan Balgimbayev – who just happens to be ex-oil minister of Kazakhstan. Reports say that the Kazakh Government’s lobbying to drop the charges against Giffen, have been ignored. This could spell the start of a new angst-ridden phase of US-Kazakh relations. Wait till they get to Kazakhstan’s heroin industry. Drugs and oil? Afghanistan II? Invasion in 2006? I’ll take the bets.

Mobil (which subsequently merged with Exxon) was the company on whose behalf Giffen was negotiating. They were of course shocked and appalled by his actions. ‘Mobil has no knowledge of any illegal payments made to Kazakh officials by any current or former Mobil employees,’ they said. This as former Mobil executive J Bryan Williams was convicted of tax evasion when he admitted to hiding $7 million in what he described as ‘income’ and what prosecutors have described as ‘kickbacks.’ He was indicted three days after Giffen. The prosecution claimed the $7 million payment was in connection with Mobil’s negotiations to gain access to the Tengiz oil field, something Williams has denied. The Tengiz contract for Mobil in Kazakhstan was negotiated by?you got it: James Giffen. Williams refused to name his co-conspirators. He received 46 months in jail.

In fact greasing palms seems to be the ‘in thing’ in the funky old oil industry. Remember the military coup in the tiny African island of São Tomé & Príncipe? It made the news for about 20 minutes back in the summer? Ever wonder what it was about? Well, the coup leaders backed down and reinstated the President of São Tomé & Príncipe, who then announced an ‘oil windfall’ for the country, to the tune of around $550 million in total – $200 million of which will be paid upfront this year. Amazing, huh? To put this in context: the annual GDP of São Tomé & Príncipe is about $45 million. Its exports are around $8 million. But this time the jails of the world will be less full – the coup leaders were granted an amnesty.

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