Wednesday, August 29, 2007


Kazakhstan has temporarily suspended work in the dangerous and difficult Kashagan oil field:

The day's wrangling added yet another layer of complexity to Kashagan, a field that shows the increasingly hostile environment encountered by Western energy companies in pursuit of crude. With the era of easy oil long gone and international demand climbing to new heights, the majors are focusing on increasingly remote and hazardous corners of the globe.
The Wall Street Journal describes shutting down Kashagan as an act of "petro-nationalism"; the Kazakh government begs to differ:
"When costs increase by 5%, by 10%, that's one thing," Kazakh Prime Minister Karim Masimov said in an interview earlier this month. Projected costs over the 40-year life of the project, he said, had increased to $136 billion from $57 billion. "When they rise by two and a half times, either the planning was wrong, or the execution is wrong, or it was deliberate."
These complaints are allegedly symptomatic of "rising assertiveness" on the part of countries like Kazakhstan. Make of that what you will.

Some of the cost overruns were due to the construction of artificial islands:
Eni started building islands. It dumped more than four million tons of rock on the seabed, secured it with steel piles and covered it with concrete slabs. Gradually, pontoonlike modules and helipads were added. The larger of the two islands, D, was surrounded by reeflike barriers to protect against ice.
Previous problems and overruns have already delayed oil production until at least 2010. But Eni executives insist that it'll be worth the wait:
Company officials have revised upwards their estimates for peak production, to 1.5 million barrels a day from 1.2 million barrels. "The more we look at Kashagan, the more we realize that this is a super supergiant," said Mr. Scaroni. "This is a field that's going to last until 2039."
World without end, amen! I believe I'll fill up my tank with premium for a change, just to celebrate.

Petro-nationalism is also rearing its ugly head in Africa:
Governments in Algeria, Chad and Equatorial Guinea have rewritten contracts or oil laws to advance national interests.
And as Adam Smith said, "when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration."

In other energy news, the UK intends to adapt salt caves for natural-gas storage, just in case global warming doesn't live up to its promise:
A recent report suggested demand for gas in the UK could exceed supply by up to 20 per cent by 2015 on the coldest days of the year in a cold winter, although a warming climate would be likely to mitigate this.
Here's hoping, eh?

(Illustration via Phil Hart.)

1 comment:

Mike said...

Why does this Adam Smith guy hate America? Is he a commie or something?

Sheesh, the way he gets quotes on the 'net, you'd think he invented Capitalism or something.