Power Plays: Russia to keep oil wealth in bonds

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//Gulfnews.com, United Arab Emirates
RUSSIA TO KEEP OIL WEALTH IN BONDS

Russia will keep its $151 billion Oil and Gas Fund entirely in sovereign bonds next year and will not invest a $19 billion sub-fund in corporate debt or stock, a top Finance Ministry official told Reuters yesterday [12/24/07].  The fund will be split on February 1 into a reserve fund, which will act as an insurance policy to cover any budget deficit caused by a fall in energy prices, and a more growth-oriented National Wealth Fund.  "The National Wealth Fund will be invested in sovereign bonds with a rating not lower than 'AA' in 2008," said Dmitry Pankin, head of the ministry's debt department. The decision means that Russia will not join this year the ranks of countries like China or Singapore, which have large sovereign wealth funds leading to some concern in the developed world over possible aggressive acquisition strategy and low transparency.  The initial plan was to start investing the NWF in corporate paper on February 1, but the government is still struggling to make up its mind about how to use the fund and whether to spend the return on the fund's investment or the fund itself.  The stabilisation fund was created in 2004 to cushion the budget from a fall in oil prices but has since outgrown its original goal, prompting a heated debate about what to do next with the oil windfall. 

2//Xinhuanet.com, China
IRANIAN ENVOY: PAKISTAN, IRAN TO FINALIZE GAS PIPELINE PROJECT BY JAN. 25

Iranian ambassador to Islamabad Mash Allah Shakeri has said that Pakistan and Iran are set to finalize an agreement on the multi-billion-dollar gas pipeline project by Jan. 25 this year, according to a report by the private NNI news agency Sunday.  The Iran-Pakistan-India (IPI) gas pipeline project is one of the most important economic projects of the region, which would bring extensive benefits for the three countries, said Shakeri.  He said that the project did not merely carry the economic importance but its social and security achievements were also noteworthy.  He was of the view that Iran had started the executive works of the project by devising the pipeline from its gas resources up to the Pakistani borders.  Shakeri expressed hope that India too would join this project and that the project would be pursued trilaterally.  

3//Association for the Study of Peak Oil & Gas - USA, US
WHAT'S NEW AT THE TAR SANDS? 

When the New York Times recently reported on falling exports due to rising consumption in the oil producing nations, the paper of record decreed that it is now time for Americans to pin their hopes on Alberta's tar sands. "More likely, experts say, [falling exports] will mean big market shifts, with the number of exporting countries shrinking and unconventional sources like Canadian tar sands becoming more important, especially for the United States." It behooves us to keep track of what's going on at the tar sands in so far as the "official" story now states that well-being of the world's most voracious oil consumer depends on steadily rising synthetic crude output. A close look reveals that all is not well along the Athabasca River. ... Increased investment in the tar sands is hampering investment in the natural gas upon which production at the tar sands depends! To make matters worse, decreased exports to the United States would result in less revenue available for natural gas drilling, which would lead to lower production rates ... and so on. ... Production growth at the tar sands slowed considerably in 2007. It is hard to avoid the conclusion that natural gas availability at the tar sands is a disaster waiting to happen. Investment continues to pour in, but it seems that few analysts or reporters have taken a hard look at future tar sands production in light of declining natural gas production in the WCBS [Western Canada Sedimentary Basin ].   Alternative energy sources such as nuclear or bitumen gasification are a long way off. Look for this emerging story to appear in press accounts within the next few years. Production of synthetic crude at the tar sands is not likely to provide the much longed for salvation that will keep American drivers on the road. 

4//Rigzone, US
SHELL CEO ON HIGHER OIL PRICES, OPERATIONS IN NIGERIA AND RUSSIA

Royal Dutch Shell chief executive officer Jeroen van der Veer said high oil prices are slowing down new projects because governments are taking longer to negotiate their slice of revenues. 

"It is evident that active government interest is delaying projects," van der Veer said in an interview published in Shell's Dutch in-house magazine this month, adding that "government negotiations for their share of the revenues are lengthier than in the past."  He refuted the idea that higher oil prices would actually accelerate decision-making, saying "in reality the opposite is true".  And ultimately this will impact on the speed at which new projects can be taken into production, van der Veer warned, although he did not specify which Shell projects might be affected.  The interview went on to set out Shell's strategy for its stricken operations in Nigeria, some parts of which have been shut following violence in the Niger Delta, as well as van der Veer's view of Shell's forced sell-down of its stake in the Russian mega-project Sakhalin-2. 

Van der Veer said Shell would continue to invest in Nigeria provided its employees can work there safely and he also warned that production would fall rapidly if investment in the Nigerian oilfields was discontinued. ... In relation to Shell's sale of its controlling stake in the giant Russian Sakhalin-2 project to Gazprom last year, van der Veer said there were no hard feelings. 

"If this is something that bothers you, you should not participate in international business. What we have learned from this is that you can only work with large Russian partners in Russia."  

5//TheEnergyNews, Canada
GRANT FUNDING CREATES BIO-ENERGY HUB IN CENTRAL ALBERTA

Over a half million dollars in provincial grants have been approved for three bio-energy projects in Central Alberta. The projects, located in Red Deer, Ponoka and Bentley, will explore the business potential for new facilities and expand the capacity of current ones. Combined, the three projects represent up to $108 million of new investment in the province.  The largest of the grants will provided to Kingdom Farm Inc. to review the potential for bio-gas technologies being applied to large scale Alberta hog operations. Intensive hog farms, such as Kingdom, could reap both environmental and economic benefits by capturing methane produced from manure, improving waste management and creating usable bio-gas for heating or electrical generation. ... Permolex, one of the province's bio-energy pioneers, will also receive grant funding for the expansion of their ethanol storage capacity and distribution infrastructure. ... Another of Alberta's bio-energy leaders will use grant funding to carry out a bio-gas feasibility study on a large scale dairy operation near Ponoka. Highmark Renewables Research LP will study the potential of integrating bio-gas digester technology utilizing dairy manure. The proposed project would be the first commercial application of the IMUSÔ technology to handle liquid manure, from a dairy in the province. 

Copyright 2008, Gloria R. Lalumia

WORLD ENERGY WATCH