Natural Gas in the Palestinian Authority: The Potential of the Gaza Marine Offshore Field

Summary: Although in strict legal terms its status is ambig-uous, a 25-year exploration license for the marine area off the Gaza Strip was awarded by the Palestinian Authority in 1999.

The Gaza Marine field was discovered the following the year though its natural gas has yet to be exploited. Politics as well as failure to agree on commercial terms have been the principal reasons for the delay.

Exploitation of the field would provide the Palestinian Authority with an important revenue stream. Using Gaza Marine gas may also reduce the need of Israel to consume its own natural gas to generate electricity for the Palestinians. Ultimately the decision will be political, but, in economic terms, the case for the exploita-tion of Gaza Marine is strong. Download PDF

 

© 2014

Iraq oil shock would kill world economic recovery, experts warn

As I have been warning people about for a number of years: Potential oil price spike in Middle East; What could this do to the Cayman Islands?

Open warfare between the government and rebels in Iraq would pose a threat to the global economic recovery should oil production from the war-torn Middle East state suffer a serious disruption, analysts have warned.

As violence threatens Iraq's oil industry, experts fear crude at $130 per barrel would damage the global economy

Open warfare between the government and rebels in Iraq would pose a threat to the global economic recovery should oil production from the war-torn Middle East state suffer a serious disruption, analysts have warned.

Brent oil prices climbed as high as $110.25 (£65.59) on Wednesday amid concerns that 3.5m barrels per day of Iraqi exports could be knocked out of the market by the violence that has seen al-Qaeda forces seize control of Mosul, Tikrit and Samarra.

"The worst case scenario is that we see production from Iraq slip down to levels in the last Gulf war, then oil could spike $20 a barrel very quickly," Ole Hansen, vice-president and head of commodity strategy at Saxo Bank told The Telegraph. "In that scenario, the entire economic recovery, which is still fragile, could stall and we could even slip back into recession in some regions."

Iraq's oil minister, Abdul Kareem Luaibi, who was attending a gathering of the 12-member Organisation of Petroleum Exporting Countries (Opec) in Vienna on Wednesday, tried to ease concerns by stressing that most of the country's crude was pumped from fields in the Shia-Muslim dominated South, where export facilities are "very, very safe".

Despite the deteriorating political situation in Iraq, where government forces have been seen fleeing from the Sunni-Muslim al-Qaeda insurgents, Opec decided to leave its production quotas unchanged. The cartel limits the output of its members to 30m barrels per day (bpd) of crude, roughly a third of the world's supply.

However, the group's ability to react to shocks to the oil market is limited, with Saudi Arabia the only producer with enough spare production capacity to cover any shortfalls. Riyadh maintains about 12.5m barrles per day (bpd) of production capacity, with 2.5m bpd - three-times Britain's output from the North Sea - lying idle at any one time.

Although Saudi's oil officials told reporters in Vienna on Wednesday that the kingdom and Opec could compensate for any Iraqi shortfalls, oil traders remain concerned.

In a note to Bloomberg, Helima Croft, Barclays' head of North American commodities research, said: "The shocking escalation in violence in Iraq raises the prospect of potential output losses. It comes as other key producers, like Libya, have also seen exports 'evaporate' amid rising unrest."

Helped by investment from international oil companies such as Royal Dutch Shell, BP and Lukoil, Iraq has increased its importance in the world oil market since recovering from the 2003 war.

The opening of the giant West Qurna-2 oilfield near Basra in March would allow Iraq to pump 4m bpd by the end of the year. Already the second-largest producer in Opec after Saudi Arabia, according to Reuters, Iraq has pumped an average of 3.5m bpd since the beginning of the year.

UK oil companies working in Iraq are understood to be closely monitoring the situation but at this point have no plans to withdraw workers from their fields.

Brent oil prices climbed as high as $110.25 (£65.59) on Wednesday amid concerns that 3.5m barrels per day of Iraqi exports could be knocked out of the market by the violence that has seen al-Qaeda forces seize control of Mosul, Tikrit and Samarra.

"The worst case scenario is that we see production from Iraq slip down to levels in the last Gulf war, then oil could spike $20 a barrel very quickly," Ole Hansen, vice-president and head of commodity strategy at Saxo Bank told The Telegraph. "In that scenario, the entire economic recovery, which is still fragile, could stall and we could even slip back into recession in some regions."

Iraq's oil minister, Abdul Kareem Luaibi, who was attending a gathering of the 12-member Organisation of Petroleum Exporting Countries (Opec) in Vienna on Wednesday, tried to ease concerns by stressing that most of the country's crude was pumped from fields in the Shia-Muslim dominated South, where export facilities are "very, very safe".

Despite the deteriorating political situation in Iraq, where government forces have been seen fleeing from the Sunni-Muslim al-Qaeda insurgents, Opec decided to leave its production quotas unchanged. The cartel limits the output of its members to 30m barrels per day (bpd) of crude, roughly a third of the world's supply.

However, the group's ability to react to shocks to the oil market is limited, with Saudi Arabia the only producer with enough spare production capacity to cover any shortfalls. Riyadh maintains about 12.5m barrles per day (bpd) of production capacity, with 2.5m bpd - three-times Britain's output from the North Sea - lying idle at any one time.

Although Saudi's oil officials told reporters in Vienna on Wednesday that the kingdom and Opec could compensate for any Iraqi shortfalls, oil traders remain concerned.

In a note to Bloomberg, Helima Croft, Barclays' head of North American commodities research, said: "The shocking escalation in violence in Iraq raises the prospect of potential output losses. It comes as other key producers, like Libya, have also seen exports 'evaporate' amid rising unrest."

Helped by investment from international oil companies such as Royal Dutch Shell, BP and Lukoil, Iraq has increased its importance in the world oil market since recovering from the 2003 war.

The opening of the giant West Qurna-2 oilfield near Basra in March would allow Iraq to pump 4m bpd by the end of the year. Already the second-largest producer in Opec after Saudi Arabia, according to Reuters, Iraq has pumped an average of 3.5m bpd since the beginning of the year.

UK oil companies working in Iraq are understood to be closely monitoring the situation but at this point have no plans to withdraw workers from their fields. More

Furthermore, if the insurgencies drag Iran into the fray will Kingdom of Saudi Arabia (KSA) be tempted to respond on the side of the Wahabi / Salafi axis? Remember that KSA recently spent 60 Billion or armaments. Where may any of this leave the Cayman Islands? Editor

 

© 2014

Global riot epidemic due to demise of cheap fossil fuels

If anyone had hoped that the Arab Spring and Occupy protests a few years back were one-off episodes that would soon give way to more stability, they have another thing coming. The hope was that ongoing economic recovery would return to pre-crash levels of growth, alleviating the grievances fueling the fires of civil unrest, stoked by years of recession.

Protester in Ukraine

But this hasn't happened. And it won't.

Instead the post-2008 crash era, including 2013 and early 2014, has seen a persistence and proliferation of civil unrest on a scale that has never been seen before in human history. This month alone has seen riots kick-off in Venezuela, Bosnia,Ukraine, Iceland, and Thailand.

This is not a coincidence. The riots are of course rooted in common, regressive economic forces playing out across every continent of the planet - but those forces themselves are symptomatic of a deeper, protracted process of global system failure as we transition from the old industrial era of dirty fossil fuels, towards something else.

Even before the Arab Spring erupted in Tunisia in December 2010, analysts at the New England Complex Systems Institute warned of the danger of civil unrest due to escalating food prices. If the Food & Agricultural Organisation (FAO) food price index rises above 210, they warned, it could trigger riots across large areas of the world.

Hunger games

The pattern is clear. Food price spikes in 2008 coincided with the eruption of social unrest in Tunisia, Egypt, Yemen, Somalia, Cameroon, Mozambique, Sudan, Haiti, and India, among others.

In 2011, the price spikes preceded social unrest across the Middle East and North Africa - Egypt, Syria, Iraq, Oman, Saudi Arabia, Bahrain, Libya, Uganda, Mauritania, Algeria, and so on.

Last year saw food prices reach their third highest year on record, corresponding to the latest outbreaks of street violence and protests in Argentina, Brazil, Bangladesh, China, Kyrgyzstan, Turkey and elsewhere.

Since about a decade ago, the FAO food price index has more than doubled from 91.1 in 2000 to an average of 209.8 in 2013. As Prof Yaneer Bar-Yam, founding president of the Complex Systems Institute, told Vice magazine last week:

"Our analysis says that 210 on the FAO index is the boiling point and we have been hovering there for the past 18 months... In some of the cases the link is more explicit, in others, given that we are at the boiling point, anything will trigger unrest."

But Bar-Yam's analysis of the causes of the global food crisis don't go deep enough - he focuses on the impact of farmland being used for biofuels, and excessive financial speculation on food commodities. But these factors barely scratch the surface.

It's a gas

The recent cases illustrate not just an explicit link between civil unrest and an increasingly volatile global food system, but also the root of this problem in the increasing unsustainability of our chronic civilisational addiction to fossil fuels.

In Ukraine, previous food price shocks have impacted negatively on the country's grain exports, contributing to intensifying urban poverty in particular. Accelerating levels of domestic inflation are underestimated in official statistics - Ukrainians spend on average as much as 75% on household bills, and more than half their incomes on necessities such as food and non-alcoholic drinks, and as75% on household bills. Similarly, for most of last year, Venezuela suffered from ongoing food shortages driven by policy mismanagement along with 17 year record-high inflation due mostly to rising food prices.

While dependence on increasingly expensive food imports plays a role here, at the heart of both countries is a deepening energy crisis. Ukraine is a net energy importer, having peaked in oil and gas production way back in 1976. Despite excitement about domestic shale potential, Ukraine's oil production has declined by over 60% over the last twenty years driven by both geological challenges and dearth of investment.

Currently, about 80% of Ukraine's oil, and 80% of its gas, is imported from Russia. But over half of Ukraine's energy consumption is sustained by gas. Russian natural gas prices have nearly quadrupled since 2004. The rocketing energy prices underpin the inflation that is driving excruciating poverty rates for average Ukranians, exacerbating social, ethnic, political and class divisions.

The Ukrainian government's recent decision to dramatically slash Russian gas imports will likely worsen this as alternative cheaper energy sources are in short supply. Hopes that domestic energy sources might save the day are slim - apart from the fact that shale cannot solve the prospect of expensive liquid fuels, nuclear will not help either. A leaked European Bank for Reconstruction and Development (EBRD) report reveals that proposals to loan 300 million Euros to renovate Ukraine's ageing infrastructure of 15 state-owned nuclear reactors will gradually double already debilitating electricity prices by 2020.

"Socialism" or Soc-oil-ism?

In Venezuela, the story is familiar. Previously, the Oil and Gas Journal reported the country's oil reserves were 99.4 billion barrels. As of 2011, this was revised upwards to a mammoth 211 billion barrels of proven oil reserves, and more recently by the US Geological Survey to a whopping 513 billion barrels. The massive boost came from the discovery of reserves of extra heavy oil in the Orinoco belt.

The huge associated costs of production and refining this heavy oil compared to cheaper conventional oil, however, mean the new finds have contributed little to Venezuela's escalating energy and economic challenges. Venezuela's oil production peaked around 1999, and has declined by a quarter since then. Its gas production peaked around 2001, and has declined by about a third.

Simultaneously, as domestic oil consumption has steadily increased - in fact almost doubling since 1990 - this has eaten further into declining production, resulting in net oil exports plummeting by nearly half since 1996. As oil represents 95% of export earnings and about half of budget revenues, this decline has massively reduced the scope to sustain government social programmes, including critical subsidies.

Looming pandemic?

These local conditions are being exacerbated by global structural realities. Record high global food prices impinge on these local conditions and push them over the edge. But the food price hikes, in turn, are symptomatic of a range of overlapping problems. Global agriculture's excessive dependence on fossil fuel inputs means food prices are invariably linked to oil price spikes. Naturally, biofuels and food commodity speculation pushes prices up even further - elite financiers alone benefit from this while working people from middle to lower classes bear the brunt.

Of course, the elephant in the room is climate change. According to Japanese media, a leaked draft of the UN Intergovernmental Panel on Climate Change's (IPCC) second major report warned that while demand for food will rise by 14%, global crop production will drop by 2% per decade due to current levels of global warming, and wreak $1.45 trillion of economic damage by the end of the century. The scenario is based on a projected rise of 2.5 degrees Celsius. More

 

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The Peak Oil Crisis: Middle Eastern Chaos - Tom Whipple

In surveying the multiple, uprisings, insurgencies, insurrections, confrontations and what have you currently going on in the Middle East, it is hard to believe that all this turmoil will not eventually find its way to our local gas pumps.

In the last week the overall situation clearly has taken a turn for the worse with large numbers of Syrian insurgents infiltrating Damascus and Aleppo for the first time accompanied by the spectacular bombing of a security meeting that killed four of the regime's top leaders. As the 16 month uprising, that to date has killed some 20,000 people, grinds towards a bloody conclusion, the Assad government has pulled out one of its last cards which is the large stockpile of chemical and biological weapons that it has accumulated with the help of the Russians as a deterrent against the Israelis.

There is no other term for all this than "a can of worms." It is going to be a long hot summer in the region with the likelihood that things will get a lot worse before fall comes.

Now such weapons are virtually useless in fighting urban insurgents, but the threat of turning some of them over to any of the numerous jihadist groups running around the Middle East carries a lot of weight. Weapons of mass destruction in the hands of a national government against which it is easy to retaliate is one thing, in the hands of stateless militants in a self-martyring frame of mind is something entirely different. The Middle East and much of the world would never be the same should nerve gas canisters rather than bombs become the weapon of choice to express dissatisfaction or score political points.

Until now the US and other western powers have been reluctant to become militarily involved in yet another Middle Eastern conflict. Should it appear, however, that the Assad government is losing control of its chemical and biological weapons, intervention, at least by Israel and likely a wider circle of Western powers, would be inevitable. The ramifications of such a foreign military intervention into the Syrian situation would be widespread.

The next ominous development was the recent bombing of a bus filled with Israeli tourists in Bulgaria. Although the Bulgarians are withholding judgment as to the sponsor of the plot until the investigation is complete, the Israelis were quick to blame Iran and their Palestinian associates, Hezbollah. If Iranian sponsorship is established, the bus bombing indicates that after the failure of a string of plots to assassinate Israeli diplomats, Tehran has turned to attacking soft targets such as Israeli tourists on the way to a Bulgarian beach. More

 

Oil jumps to 43 month high on Saudi blast report.

The price of crude oil has jumped to its highest level in more than three-and-a-half years after reports of a blast at a pipeline in Saudi Arabia, the world’s biggest oil producer.

Brent crude rose $5.74 to $128.40 per barrel in late Thursday trading in New York, the highest since July 2008.

However, prices eased a bit after Saudi officials denied the reports.

Brent was trading at $125.86 per barrel in Asian trade on Friday, with US light sweet crude at $108.92 per barrel.

The new high set on Thursday beat the level seen during the Libyan civil war last year.

‘Market nervousness’

Oil prices have been rising since the start of the year amid concerns about the tensions between Iran and the West over its controversial nuclear programme.

The US has imposed fresh sanctions against Tehran targeting the country’s oil exports, while the European Union has announced a ban on imports of Iranian oil.

For its part, Iran has threatened that it will close the Straits of Hormuz, a vital oil-trade route for oil from the Gulf - including Saudi oil - if the West imposes more sanctions.

Analysts said all these issues had created an uncertainty over oil supplies and the latest reports had only fanned those fears further.

“The sharp move up on the pipeline story points to the market nervousness on anything related to supply problems,” said Gene McGillan of Tradition Energy. More

 

Nuclear power plans in Africa, Middle East

Dec 29 (Reuters) - Many countries in Africa and the Middle East have said they want to develop civilian nuclear programmes to meet rising power demand.

Nuclear is seen by many as a long-term solution to high fuel costs and an effective way to cut carbon emissions from the electricity generation sector.
A fall in fossil fuel prices since summer 2008 has made nuclear power less attractive than it was when oil CLc1 was above $147 a barrel in July 2008. South Africa is the only country in the region with an operational nuclear power plant.
Below are the nuclear aspirations of countries across Africa and the Middle East. More >>>