Sunday, March 16, 2003

More oil stories

Here are two stories in today's LA Times about oil. First, from the front page, "Angolan Strife Threatens a Key Source of U.S. Oil" by Solomon Moore:
CABINDA, Angola -- The Angolan armed forces are surging through this remote province to end a rebellion that has threatened a U.S. petroleum giant operating here and could vex President Bush's plans to reduce America's need for Middle East oil.

And as Angola escalates what had been a low-intensity conflict, civilians are being caught in the cross-fire....

Cabinda is particularly important to Angola because the oil industry is the only economic sector that survived the civil war, accounting for 90% of this nation's export revenue. During that long conflict, petrodollars enabled the government to spend a third of the gross domestic product on defense.

At the center of the current dispute is the Cabinda Gulf Oil Co. -- a wholly owned subsidiary of ChevronTexaco Corp. of San Ramon, Calif. Sonangol, a state-owned petroleum company, is ChevronTexaco's partner in Angola and a source of much of the country's wealth. Angola, which produces about 900,000 barrels a day and about $4 billion in annual oil exports, accounts for nearly 4% of the U.S. oil supply, binding it to America's national interests.

Despite revelations by the international watchdog group Global Witness that as much as $1.4 billion in government revenue was unaccounted for in 2001, the country remains key to Bush's plans to reduce U.S. reliance on the Middle East by turning to oil producers in western Africa. That policy is taking on greater urgency as the administration prepares for possible war with Iraq and as political unrest has slowed Venezuela's oil production.
From the business section, a James Flanigan column, "Hear the Warning in Energy Crunch."
The longer-term outlook is...troubling. The basic problem is one of economic fundamentals: Production is declining in many places, while consumption of oil is rising rapidly in countries that never used much of the stuff before.

China, for instance, is burning up gasoline and other oil products at double the pace it did 10 years ago. That nation now uses one-fourth as much oil as the U.S., whereas a decade ago it used less than one-seventh. India too has doubled its use of oil over the same span. As these countries continue to develop economically, their need for oil will only get bigger.

Yet production is falling, not only in old fields in Alaska and the North Sea, but in the Middle East as well. "Saudi Arabia's main wells are past their peak," says Matthew Simmons, head of Simmons & Co., a Houston-based energy investment banking firm....

[W]hat we are witnessing is the end of an industrial model that counts on new discoveries of oil and gas to meet the swelling demand for energy.

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