The following are the highlights from around the world as reported in the Peak Oil Review for last week.

U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said. Deliveries of petroleum products, a measure of consumption, averaged 19.6 million barrels a day in the period, down from 20.7 million barrels a day a year earlier. Gasoline demand averaged 9.06 million barrels a day from January through October, down 2.6 percent from a year earlier.

The drop in crude prices is threatening investment needed to boost global oil production, Total CEO Christophe de Margerie said. In the long term, de Margerie said crude prices will rise, making investment worthwhile in projects such as the Shtokman field in Russia and Canadian oil sands.

After the tanker Sirus Star was seized by pirates on Nov. 15, Saudi Arabia said it will join a fleet of NATO warships on an anti-piracy mission, as hijackers bolstered defenses around a Saudi tanker captured off the East African coast. Since January, at least 91 vessels have been attacked in the Gulf of Aden,

Shippers controlling almost a fifth of the global fleet of crude-oil supertankers may avoid Egypt’s Suez Canal after an escalation in piracy off east Africa, potentially increasing the cost of delivery and reducing supply.

Pemex is preparing 68 new drilling sites at a geologically challenging oil basin-Chicontepec – that the company hopes will offset declining production in other oil fields.

Brazil’s Petrobras said on Friday that they found light oil in two new offshore wells, expanding its “pre- salt” discoveries. There may be 1.5 billion to 2 billion barrels of recoverable oil equivalent in the new find.

Petrobras has postponed construction tenders for 28 deep-sea drilling rigs to the coming year.

The global financial crisis has put the brakes on Brazil’s biofuels boom, drying up foreign investment and domestic credit, stalling new projects and prompting cash-strapped ethanol producers to indefinitely postpone $30 to $40 billion of expansions.

Russia’s Gazprom would like to avoid supply cuts to Ukraine in 2009 but will not continue deliveries without a new contract for 2009.

In Russia, the collapse in the value of oil is likely to have several catastrophic consequences for the economy, including a possible devaluation of the ruble and a severe drop in living standards next year.

Russian oil companies may cut production and exports should they become unprofitable, Energy Minister Sergei Shmatko said on Tuesday.

According to Lukoil, a “significant” reduction in OPEC’s oil production may drive the average price of crude back above $80 a barrel next year, aiding the Russian economy.

In the current economic climate, 66 out of 262 approved wind farms in the US have either been outright canceled or postponed.

Yemen is facing an economic and political crisis as the country’s oil resources near exhaustion. The World Bank predicts that Yemen’s oil and gas revenues will plummet over the next two years and fall to zero by 2017 as supplies run out.

China, the world’s second-largest energy user after the U.S., is accelerating plans to cut fuel prices for the first time in two years as the nation’s economy slows and oil costs fall. The government will separately introduce a tax on retail gasoline and diesel sales to replace road tolls and maintenance charges.

In Alaska, falling oil prices will take a bite out of the state budget and put a damper on oil-field investment, Governor Palin told a conference of major North Slope oil operators on Wednesday.

Canada’s oil-rich province of Alberta is rolling back a large portion of the royalty hikes that were to take effect in January in order to encourage drilling in the province’s sagging energy industry.

The biggest oil companies including Saudi Aramco, Royal Dutch Shell Plc and Petroleo Brasileiro SA are accelerating spending cuts and delaying projects as the world enters a recession, said Morgan Stanley & Co. As many as 44 projects have been delayed and faced cuts in investments as of Nov. 18, compared with 19 in a Nov. 5 report.

While the idea of running US vehicles on natural gas has lately received a great deal of attention, powering our cars with electricity is a more sensible option on all fronts–national security, efficiency, climate stabilization, and economics.

Banks in Europe and Britain, and their borrowers, face another blow as plunging oil prices tighten the spigot of petrodollar deposits. With oil prices having fallen, dollar flows into European banks will likely drop dramatically. Moreover, a global recession and financial crises mean that oil producers such as Russia and the Middle East states will have to spend money at home, further diminishing the money available to international banking.

In West Virginia, Synthesis Energy Systems and Consol Energy shelved an $800 million coal-to-liquid fuels plant, with Synthesis chief executive Tim Veil citing “the current state of U.S. credit markets.”

Dubai, the second largest of the seven sheikhdoms in the United Arab Emirates, is the most vulnerable place in the Gulf to lower oil prices as real estate prices and debt refinancing pose “real risks.”

Petro-Canada said it delayed to next year a decision whether to mine oil sands at the proposed C$25.3 billion ($20.6 billion) Fort Hills project in northeastern Alberta because of rising costs and falling oil prices.

Tokyo Electric Power Co. received less liquefied natural gas and heavy fuel in October on expectations that the slowing economy will further reduce power demand.

Officials in California have unveiled ambitious plans to turn the San Francisco Bay Area into one of the leading centers of electric vehicles in the world. If it succeeds, the strategy announced yesterday will see billions of dollars poured into a new power infrastructure that will turn the region away from fossil fuel and to renewable energy – and convince millions of people to switch to green technology.

Oil prices fell well below the level needed for several OPEC countries to balance their budgets. For Venezuela that number is $102, Iran $83, Saudi Arabia $54, Kuwait $52 and UAE at $54. This is a strong motivation for these and other OPEC countries to really cut production rather than just say they are going to cut. Tanker tracker Petrologistics said OPEC shipments have declined by 1.2 mbpd as we approach the end of November but still less than the 1.5 mbpd announced quota cut.

Looking on, off Capitol Hill

President-elect Barack Obama is weighing prospects for energy secretary with a list in Democratic circles that includes Washington insiders, a governor and at least one break-the-mold executive.

Possible candidates mentioned to head the department range from Sen. Jeff Bingaman, D-N.M., to Kansas Gov. Kathleen Sebelius and Dan Reicher, who directs energy initiatives at a Google foundation. Another candidate that had been mentioned is Houston Mayor Bill White.

The Obama transition team has declined to comment.

 

Reicher, 52, is, perhaps, the most prominent contender for an out-of-the-box choice. 

The biology major at Dartmouth and a graduate of Stanford law school served in the Clinton administration as an assistant secretary for energy efficiency and renewable energy. He now heads climate change and energy initiatives at Google.org, a philanthropy funded by the Mountain View, Calif., Internet company.

On Capitol Hill, Obama could turn to Bingaman, 65. The chairman of the Energy Committee, who has served in the Senate for 25 years, could play a major role as lawmakers consider how to create a cap-and-trade system to reduce greenhouse gas emissions. But Bingaman has repeatedly signaled interest in remaining in the Senate.

Former Rep. Philip R. Sharp, D-Ind., 66, also has been mentioned. A veteran Democratic congressman from Indiana, the one-time director of Harvard’s Institute of Politics leads the nonprofit think tank Resources for the Future, which provides policy research.

White, 54, who is in his second term as mayor, also has been cited as a possible candidate for the Energy Department post after serving as deputy energy secretary during President Bill Clinton’s first term. The former lawyer and energy company executive would bring broad executive experience to the Cabinet post. But White spokesman Frank Michel said the mayor “is not lobbying or jockeying for a position, and he’s not been vetted.” White has hinted interest in mounting political campaigns in 2010, either for a Senate seat or for governor.

Sebelius, 60, has pressed recycling during her term as governor and vetoed a bill authorizing construction of coal-fired power plants. She also has called for greater federal support for renewables such as wind energy.

The selection process for an energy secretary continued against a backdrop of uncertainty over the scope of the job.

 

A less important position?

The Center for American Progress Action Fund, a Democratic group with close ties to the transition team, has urged Obama to create a new national energy council within the White House to coordinate energy and environmental policies. 

The head of such a panel has not been made clear, although Carol Browner, the former head of the Environmental Protection Agency, is often mentioned in Democratic circles.

Given the emphasis the new White House seems to be “putting on energy inside its own walls, the energy secretary now becomes a less important position than maybe in the past,” said Frank Maisano, an energy specialist with the law firm Bracewell & Giuliani in Washington, who represents utilities, refiners and wind power developers

“This is someone who has to know about the Strategic Petroleum Reserve and nuclear weapons cleanup sites,” Maisano said. “It’s not a thrilling job.”

The nation’s third largest ethanol producer confirmed that it has received a buyout offer.

Several major ethanol producers are having trouble staying afloat with the volatility of the corn market, decreasing cost of conventional gasoline and the weakening world economy and credit crunch.

VeraSun Energy Corp., which filed for bankruptcy on Oct. 31, released a statement late Monday night that it has received a “non-binding unsolicited indication of interest with respect to the purchase of substantially all its assets.”

The statement comes after a Sioux Falls, S.D. television station reported earlier in the day that the nation’s largest maker of the renewable alternative fuel, POET, is considering buying other ethanol companies.

VeraSun did not confirm who the interested party was or what it was offering, but said in the statement that the offer is being considered.

“[VeraSun] intends to pursue this indication of interest to its conclusion and evaluate other proposals it may receive in accordance with its obligations as a debtor in possession under Chapter 11 of the Bankruptcy Code,” the statement reads.

The chief U.N. nuclear inspector has urged caution against prematurely judging Syria’s atomic program by reminding diplomats about false U.S. claims that Saddam Hussein had weapons of mass destruction.

Mohamed ElBaradei made the remarks Monday while speaking to diplomats on the International Atomic Energy Agency’s board. His comments at the closed meeting were made available to The Associated Press on Tuesday.

At issue is whether the agency should give Damascus potentially sensitive nuclear guidance at a time when Syria is being investigated for alleged secret atomic activities.

ElBaradei did not mention the United States by name. But the claims were used by the U.S. as the rationale for going to war with Iraq.

Long-awaited relief at the pump continued over the last week with the nation’s average retail gasoline price falling below $2 a gallon to its lowest level in 46 months, the Energy Department said Monday.

It’s also been that long since California’s average gasoline price was below $2 a gallon. But the state seemed likely to challenge that old barrier sometime this week.

Gas prices have fallen so far and so fast that some experts are concerned Americans who have drastically curtailed their thirst for gasoline might be ready to guzzle again.

“GM dealers are probably seeing more interest in big SUVs this week than they did in July,” said Lester Lave, an economics professor at Carnegie Mellon University’s Tepper School of Business.

The U.S. average price of a gallon of self-serve regular gasoline fell 18 cents over the last week to $1.892, according to the Energy Department’s weekly survey of filling stations. That was $1.205 below the year-earlier price and the lowest since the $1.853 recorded on Jan. 24, 2005.

The drop was even more dramatic in California, where the average fell 26.2 cents during the week to $2.112. It hasn’t been lower since $2.091 gasoline was recorded Feb. 14, 2005.

California’s average was $1.286 below the year-earlier price.

Truckers and any business that relied on diesel fuel to move raw materials or products were also enjoying a huge change. The average U.S. diesel price, which peaked at a national average of $4.764 a gallon on July 14, was down to $2.664 on Monday.

The turnaround was even more exceptional in California, where diesel has fallen by nearly half from $5.027 a gallon on May 26 to $2.605.

Lave said that Congress shouldn’t give U.S. automakers a bailout unless they promise to focus on smaller, fuel-efficient and alternative-technology vehicles.

“Americans might go back to their old habits,” Lave said, “and we would be shooting ourselves not in the foot but a little higher up.”

Gasoline prices may be close to bottoming out, said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. That might not be so bad, he said, because fuel costs are being dragged lower in part as a result of the economic malaise here and abroad.

“It’s going to take more of the same miserable economy to take gasoline prices appreciably lower,” said Kloza, who said that California could come close to averaging less than $2 a gallon in the next week or so.

The oil service’s daily survey of credit card receipts at 10,000 gas stations around the U.S. showed that the number of states with average prices of less than $2 a gallon had more than doubled in the last week, to 36 from 15.

Crude oil futures got a big bounce Monday after the dollar weakened in value against the euro and Citigroup Inc. received a bailout that could help the bank stay afloat, analysts said.

Light sweet crude for January delivery jumped back above the $50 barrier on the New York Mercantile Exchange, climbing $4.57, or 9%, to $54.50 a barrel.

Phil Flynn, vice president and senior market analyst for Alaron Trading Corp., said that oil probably would head lower again.

“The government is not going to be able to write a check like that every day to keep this going,” Flynn said.

Lave said that the oil markets would be just as volatile over the next five years as they have been in the last five months. He said oil prices had less to do with actual supplies and more to do with swings in demand and too much speculation over whether there was too much oil or too little.

“The supply of oil has remained relatively constant,” Lave said.

“But futures markets have been overshooting on the upside when economies are booming and there are concerns about supply. They are doing the same now over a potential glut as the world moves into a recession.”

Russian gas giant OAO Gazprom (GAZP.RS) may invite international oil majors such as ConocoPhillips (COP) and Exxon Mobil Corp. ( XOM) to jointly develop gas projects in the country’s Arctic region, the company said Tuesday.

Gazprom is considering production of liquified natural gas, or LNG, in the arctic Yamal region, but hopes to attract partners to share the financial and technical challenges.

U.S. oil majors ConocoPhillips and Exxon Mobil are on a list of possible partners, Gazprom said.

Monday, Chief Executive of ConocoPhillips, Jim Mulva, held talks with Gazprom CEO Alexei Miller in Moscow to discuss joint projects, in particular in Alaska.

Royal Dutch Shell PLC (RDSB) said in June it had been shortlisted by Gazprom for one of the potential gas projects in Yamal.

French oil major Total SA (TOT) has also expressed interest in a further joint venture in Russia, after the company was chosen as a junior partner in developing the Shtokman field, one of the world’s largest gas deposits, located in the Barents Sea.

U.S. majors like Chevron Corp. (CVX) and ConocoPhillips were on the short list of foreign companies Gazprom was considering as partners for the Shtokman project.

Instead, Total and Norway’s StatoilHydro (STA) were chosen as partners, holding 25% and 24% stakes respectively. Gazprom holds a 51% controlling stake.

With the EU joining the race for offshore oil and gas exploitation in the icy Arctic, the interest is intensifying as greedy mankind estimates that global warming is shrinking the polar ice and that could someday open up resource development and new shipping lanes.

The EU on Friday gave its clearest signal to date that intends to play a role in the escalating race to exploit the Arctic mineral, oil and gas resources, fishing stocks and new shipping routes that are being made increasingly accessible by global warming.

The move is likely to irk other Arctic players, including Canada, Russia, Norway and the United States all of which have issued territorial claims in the polar region.

The European Commission said the 27-member bloc, who has three member states in the polar region, Denmark, Finland and Sweden, should get involved in the current rush in the Arctic, notably in offshore oil and gas exploitation. Denmark controls the semiautonomous territory of Greenland.

The announcement was part of a first outline of priorities the EU is seeking in the Arctic, an area where the bloc is now planting its own flag of sorts as a key economic and security interest for Europe.

Arctic multilateral governance through the existing legal frameworks as well as to keep the Arctic ice will trigger a scramble for resources between the states with an interest in the region, Denmark, Sweden, Finland, Norway, the US, Canada, Russia, and Iceland.

Various territorial disputes have already emerged and last year Russia sent the submarine under the North Pole to plant a flag in a symbolic gesture intended to underlines its claims to the region.

Environmentalists have also expressed fears that the melting of the arctic ice could have the ironic effect of further accelerating climate change by giving countries access to an estimated quarter of current untapped oil and gas reserves.

This obsession with exploiting the Arctic for all its worth is overshadowing the real issue at hand: climate change. Nowhere else in the world is climate change occurring faster than in the Arctic, with winter temperatures having risen 3-4 degrees Celsius over the past fifty years and the polar ice cap having lost nearly 20% of its volume in the past two decades.

Despite providing easier access to resources, the rapid melting of Arctic sea ice is an extremely worrisome phenomenon. As the Arctic’s ice and snow cover disappears, the albedo of the Earth’s surface decreases, meaning that more solar radiation is absorbed rather than being reflected back out into space.

This further increases the rate of global warming. It is for this reason that Arctic climate change should not be viewed as a positive development. It is dangerous to highlight its supposed benefits at the risk of diminishing our combative response.

This rush to claim whatever stores of oil and gas are contained within the Arctic region will only extend our dependency on fossil fuels at a time when it is crucial that we start to develop more green technologies and invest in renewable forms of energy.

The ridiculous fact that we have now actually resorted to searching for oil in the Arctic Ocean, one of the least accessible places on the planet, only serves to highlight that there is a finite amount of oil available to us and it is time to look to other energy resources.

Gaz­prom’s deal to gain a 16.5 percent stake in Libya’s Elephant oilfield under an asset swap with Italy’s Eni S.p.A. has been postponed until later this year, the deputy head of the Russian energy giant said on Tuesday.

Under the deal, which was to be finalized in late October, Gazprom is to take half of Eni’s 33 percent stake in the deposit with reserves estimated at 68 million metric tons (499.8 million bbl) in exchange for Eni taking part in projects to develop northwest Siberian assets owned by the Arctic Gas company.
“We will finalize it before the end of the year,” Alexander Medvedev said, explaining that the delay was due to the global financial crisis and declining oil prices, which could lead to reviewing the terms of the deal.

Medvedev earlier said a cash settlement could also be used in the deal with Eni.

Gazprom has two prospecting licenses in Libya and minority stakes in two projects run by Germany’s Wintershall.

Gazprom’s foray into Africa has provoked concerns in European countries, which have become increasingly dependent on the Russian company. Gazprom supplies over a quarter of the EU’s natural gas.

Libya’s position as an oil and gas exporter has been strengthened with the lifting of international sanctions. The country is ranked first in Africa and fifth in OPEC in terms of proven reserves of light oil, which stand at 5.1 billion metric tons (37.48 billion bbl).

Eni, which formed EniNeftegaz consortium with Enel in Russia, bought Arctic Gas and other assets at a tender for Yukos assets in 2007. The Arctic Gas assets’ reserves exceed 900 billion cubic meters of gas, 300 million tons of condensate, and 860 million tons of oil.

Gazprom has an option to buy 51 percent of the Russian assets held by EniNeftegaz within two years.

Eni’s other projects in Russia include a 50 percent stake in the Blue Stream gas pipeline under the Black Sea, the other stake belonging to Gazprom, and the company is also involved in the South Stream pipeline to supply Russian gas to Europe.

Peace.

“If there weren’t almost insurmountable technical and financial challenges to get that stuff, why isn’t it happening?” Chandler said.

Russia also has problems on land, where ice roads needed for development in the Western Siberian basin are melting earlier, leaving less time for exploration and development, Chandler said.

U.S. Navy Cmdr. Andrew Garlington, who works on maritime security policy, said the Navy is planning for increased use of the Arctic.

“But let me give you a caution,” Garlington said. “When you hear ice-free waters in the Arctic, that doesn’t mean it’s free of all ice. That just means it’s less than 10 percent coverage. It’s still a very dangerous and dynamic environment up there.”

The Coast Guard also is looking north and working with Canada and Russia on oil spill response plans.

The Northwest Passage between Baffin Bay and the Beaufort Sea was navigable for a period starting late last August, and also the year before. But Michael Storgaard, a spokesman for A.P. Moller-Maersk, the world’s biggest shipping company, said it’s shallow with many narrow straits, not fully mapped in detail and lacking large-scale rescue and repair facilities.

“For now, we do not see any immediate commercial possibilities in connection with the Northwest Passage,” he said. “Our view is also that it will be some time, perhaps even decades, before we see a more consistent commercial utilization.”

The Bush administration’s authorization of a major new offshore oil drilling program in the Arctic Ocean was dealt a serious setback Thursday when a federal appeals court ruled the plan did not adequately consider the effect on bowhead whales and the native villagers who make their living from the frigid coastal waters.

Ruling on the first of several major new projects for tapping oil and gas deposits from the Arctic floor, the U.S. 9th Circuit Court of Appeals said the federal government should have prepared a more exhaustive environmental review before concluding that harm to whales, caribou and other Arctic wildlife either would be insignificant or could be mitigated.

In a 2-1 decision, the court ordered the federal Minerals Management Agency to prepare a more thorough review, a decision that probably puts the offshore exploration plan up for new consideration under the administration of Barack Obama. Environmentalists have fought the plan, saying it could have disastrous consequences for Arctic wildlife.

“I think the new administration can respond to this decision by calling for a timeout on new exploration and leasing in the Arctic Ocean until a full review of potential impacts and conservation measures is completed,” said Eric Jorgensen, managing attorney at Earthjustice in Juneau, Alaska.

Rebecca Noblin of the Center for Biological Diversity, one of several plaintiffs in the case, said in a statement: “If polar bears and other ice-dependent species are to survive as the Arctic melts in the face of global warming, we need to protect their critical habitat, not turn it into an industrial zone.”

Officials at Shell Offshore Inc., which has proposed to drill up to 12 exploratory wells in the Arctic’s Beaufort Sea over the next three years, said they were convinced that the company had “met or exceeded” requirements for environmental analysis — including how noise from exploratory drilling might affect the migration patterns of fish, endangered bowhead whales and caribou, which give birth in the nearby Arctic National Wildlife Refuge.

“The U.S. faces an energy supply crisis, and delays like this only extend and aggravate it. In times of shrinking global supply and ever increasing reliance on imported oil, the Alaska offshore could be a significant resource for national energy security,” Shell said in a statement.

Republican Gov. Sarah Palin, who has urged the nation to take better advantage of Alaska’s untapped oil and gas resources, expressed determination to get the project back on track.

“We’re disappointed, but will work with the company moving forward from here,” said her chief spokesman, Bill McAllister.

The decision requires the Minerals Management Agency to create either a revised environmental analysis, which might be done relatively quickly, or a full environmental impact statement, which would likely mean a lengthy delay.

“We are unpersuaded that MMS took the requisite ‘hard look’ at the environmental impact of this project. There remain substantial questions as to whether Shell’s plan may cause significant harm to the people and wildlife of the Beaufort Sea region,” Judge Dorothy W. Nelson wrote for the majority.