Peak Oil news – Russian production declines with an irony alert

Russian oil production declined, for the first quarter of this year, for the first time in a year. The WSJ quotes various sources, blaming various causes:

Industry watchers and Russian officials generally blame the country's production slowdown on a combination of weather and tight electricity supplies in some parts of the country. …

In an interview, Leonid Fedun, vice president of OAO Lukoil, one of Russia's biggest oil companies, said a mild winter and higher temperatures mean Siberia's icy ground is less stable, making it harder to move drilling rigs between oil wells.

How ironic that Big Oil would get hoist by the petard of global warming, especially since “former” Russian President Vladimir Putin once welcomed global warning. And, this should give MUCH more pause to the idea of drilling in the Arctic National Wildlife Refuge, certain to soon have similar conditions.

And, speaking of Peak Oil, take a look at the graph at the left. Russian output has been plateauing for more than a year. And, Russian oil industry watchers know it.

In a longer-term worry, they also point to aging Siberian fields that once fueled its production growth.

There’s the rub. Russian oil producers, obviously learning too much from the U.S., think more tax breaks are the answer. And, Moscow is obliging.

In an effort to kick-start investment, Russia's government recently unveiled a $4.2 billion tax cut for the sector. It was broadly welcomed in the industry. “It’s a very important point that the Russian government has realized that with cost growth and inflation, there needs to be additional relief for companies to develop fields,” said Bob Dudley, chief executive of TNK-BP, BP PLC’s Russian joint venture.

But, is it enough? Maybe not. Probably not.

Lukoil’s Fedun says Russia's oil industry needs $1 trillion of investment during the next 20 years just to maintain production of 10 million barrels a day. Analysts worry the tax cut is inadequate to achieve that. "We still do not see it generating enough free cash flow to the industry...to support higher investment levels," Citigroup said in its report.

If it’s true that production costs in Alberta’s oil sands are now up to $65/bbl, Russia probably needs massive infusions to get its fields up to snuff.

Remember, its original oilfields, some now in Azerbaijan, are more than 100 years old. That’s part of why I couldn’t believe all the hype about them in recent years.

Oh, and all of you, rein in your Petrobras enthusiasm. The Brazilian national oil company just denied a state oil regulatory agency’s “massive oilfield” claims. Interesting I found this news on the website for Xinhua, China’s national media company.

And, even there is major oil there, it’s beneath 23,000 feet or more of ocean water, sand and rock, and a massive salt dome. The second exploratory well in the area hasn’t even gotten to the salt dome yet, which has an estimated thickness of 6,500 feet.


Among other new board members? Donna J. Barrett, president and chief executive officer of Community Newspaper Holdings Inc. CHNI is the “Chainsaw Al” of small-town daily newspaper operations. They buy a newspaper, or small group thereof, and immediately attempt to recoup their money ASAP.

Oh, and all of you, rein in your Petrobras enthusiasm. The Brazilian national oil company just retracted its “massive oilfield” claims.

Just how overpaid is that overpaid CEO?

Now you can find out. The AFL-CIO’s Executive Paywatch website will probably get bookmarked by a lot of people.

Out of curiosity, the first company I clicked was Jack in the Box. CEO Linda Lang hauled more than $6 mil last year per AFL-CIO accounting methods. That’s a lot of Jumbo Jacks. For making baking soda, for doorknob’s sake, Church & Dwight (Arm & Hammer folks) CEO James Craigie scooped up nearly $4 mil. And, it would appear that Sierra Club Executive Director Carl Pope probably won’t wring enough out of his branding deal with Clorox. Its CEO, Donald Knauss, raked in more than $12 mil by AFL-CIO accounting.

Plus, the website has this fun little “shopping cart” button beneath each CEO’s pay. For example, for Knauss, on his salary, he could buy:

• Health insurance for 2,867 uninsured workers.
• Day care for one year for 1,861 working mothers.

Enough said, eh? Of course, I tried looking up some folks, like Dean Singleton at MediaNews, then remembered they run privately held companies.

Oh, well, at least for publicly traded companies, this is a great tool.

Bush tries bait-and-switch with carbon dioxide cap

The sliver of good news? Reportedly, for the first time, the Bush Administration is not reflexively nixing carbon dioxide emissions caps. Of course, there’s always a catch.

The first one, in this case, is that BushCo would limit carbon caps to electric power plants only.

The second catch is this was a political trial balloon floated in a meeting with the most anti-cap Republican conservatives in Congress.

The third cap, as admitted by Dana Perino, is this is an attempt to avoid Environmental Protection regulation of CO2, per a Supreme Court ruling last year that says it has the power to do so:

“We are dealing with what we call a regulatory train wreck.”

So, here’s what the White House is going to propose to avoid the “regulatory train wreck.”
It will soften up the conservatives enough to get them on board for something.

It will then propose a cap-and-trade bill limited to power plants only.

It will throw in a rider that specifically says CO2 is not a human health issue and therefore not under EPA purview.

It will make the cap looser, with a longer implementation time, than legislation already in the Senate.

When the smoke and mirrors are apparent, and resisted, Bush will blame “obstructionist Democrats.”

There, that wasn’t so hard, was it?

There goes the newspaper neighborhood

A lot of liberal bloggers may be wringing their hands about Rupert Murdoch being elected to the Associated Press board of directors, but as an ink-stained wretch/member of the Fourth Estate myself, I can tell them their concerns, while not necessarily overblown, are too narrow.

Among other new board members? Donna J. Barrett, president and chief executive officer of Community Newspaper Holdings Inc. CHNI is the “Chainsaw Al” of small-town daily newspaper operations. They buy a newspaper, or small group thereof, and immediately attempt to recoup their money ASAP.

Of course, Dean Singleton, already on the board, and his MediaNews, aren’t exactly a gem of newspaper ownership either. After all, it was Deano who asked Barack Obama if he planned to do more to fight Obama bin Laden. It may have been an accident, but I wouldn’t be so sure.

If you want to know more about Deano (disclosure – I worked at one of his papers in the late 1990s), all you need is the quote below from this NYT story:

“Mr. Singleton, 54, a bantam figure with flinty blue eyes, is indeed thought of as something of a magician in the newspaper world — having transformed himself from the son of a ranch hand in a tiny town in Texas to a media baron who now controls a newspaper empire that sprawls from coast to coast,” the Times adds. “He has, in a manner of speaking, sawed many of his competitors in half, only to have them hop off the table and become his partners.”

But, don’t underestimate him, says John McManus from San Jose State’s j-school:

“He aspires to be a mogul in the ranks of Pulitzer and the Hearst of old, and I think he's going to achieve it.”

Trust me, Rupert Murdoch isn’t really an “outlier” here.

Delta-Northwest merger – overall bad for consumers from where I sit

Between the Federal Aviation Administration crackdown on safety, airlines in general packing planes even tighter due to fuel costs, and the likelihood of a Continental-United Merger to follow on its heels, I’m pretty skeptical about the consumer value of the Delta-Northwest merger.

For example, in this deal, Delta claims it won’t close any hubs of either airline, but that’s doubtful. I have to think the Cincinnati hub will be downgraded to a semi-hub, if not written off. Ditto for Salt Lake City. Northwest has hubs in Minneapolis, Detroit Metro and Memphis.

Sorry, Delta-Plus, but ain’t no effing way you’re keeping hubs in both Memphis and Cincy. Just ain’t happening. One’s being eliminated entirely and the other’s being downgraded. My money is on Memphis getting the ax and Cincy being downgraded.

Detroit will also be downgraded, I think. Given that Toyota now makes more cars in the U.S. than Ford or Chrysler, and may catch GM within a decade, not to mention Nissan and Honda’s U.S. operations, the combined airlines have fewer reasons to have a hub in the former Motor City, not to mention it continuing to lose population like a sieve. BFD if the airport itself built a new terminal wing just a few years ago; that was stupid.

Atlanta is obviously safe. So, too, is JFK. If Detroit Metro is downgraded, than Minneapolis-St. Paul is safe. A western presence will keep Salt Lake City safe, too.

Of course, this may not get past government antitrust regulators, especially in the aforementioned safety environment. And, given already-expressed disgruntlement, you may see a Northwest pilots’ strike if there is a merger.

The Northwest pilots union said in a statement: “This agreement clearly disadvantages NWA pilots both with respect to economic issues and seniority list integration.

“The NWA MEC will use all resources available to aggressively oppose the merger.”

Beyond that, this page points out Delta’s lousy past history of developing hubs. Surrendering LAX to United? Surrendering D/FW (where I live, and I know the history), to American? Not smart.

Assume that a United-Continental merger also closes a hub or two. Why an unmerged United has hubs in both Los Angeles and San Francisco, especially with a third western hub in Denver, is nonsensical. David Grossman of USA Today recommends it look at scaling back at LAX and Denver, as well as Washington Dulles.

As for Continental, Houston would stay as a hub, given the airline’s strong Mexico, and Latin American, routes. Newark isn’t ideal, but I don’t think a combined United-Continental would give that up, especially if Dulles were killed as a hub.

Cleveland? For the same reasons as Detroit, it doesn’t make sense as a hub. Especially in a merged airline with a hub at O’Hare, it would get killed.

So, if the government approves both mergers, you’re going to have a lot fewer options flying out the Rust Belt or Mid-South, in all likelihood.

Israel gives Carter cold shoulder but no security

In what is being described as unprecendented, Israel’s Shin Bet is refusing to cooperate with former U.S. President Jimmy Carter’s Secret Service detail. Why?

Because he’s visiting Hamas leaders. The cold shoulder has gone so far as for Israel to lie and claim Carter never asked for any help from Shin Bet.

As for Hamas being committed to the destruction of Israel, well … not exactly, as M.J. Rosenberg notes:

Even Khaled Mashal, the Syria-based political chief of Hamas, said this week that “Palestinians have adopted a joint position regarding the establishment of a Palestinian state within the borders of 1967.” The Arab Initiative (the Saudi-sponsored plan endorsed by every Arab country) not only recognizes Israel’s right to the 78 percent of Palestine that is Israel but pledges full recognition and normalization of relations if Palestinians are permitted to establish a state in the other 22 percent.

I don’t think it gets much clearer than that. In case it doesn’t, Rosenberg explains that West Bank settlements by Israelis, with the concomitant checkpoints, etc., fragment what’s left of that “22 percent” into microparcels.

Obama and Clinton, like McCain, though, will continue to cut blank checks to Tel Aviv.