China Gearing Up to Drill for Oil in U.S. Territory in the Gulf of Mexico?

~~By InsightAnalytical-GRL

Back in the beginning of the year we noted how the Chinese were expanding their influence by buying all sorts of resource companies around the globe, including sources of oil. (See: The Past Week: February 22-28, 2009 (Laura Bush Lives On; Budget Director Peter Orszag/Robert E. Rubin, Iceland Bankrupters; China Taking Advantage of U.S. Weakness As It Looks to Buy Foreign Oil Companies?; U.S. Deaths Spike in Afghanistan; Baracus Caesar Obamacus Meets Barackistanis).

A few years ago the U.S. was able to rebuff a move to by China to buy Unocal. But things have changed dramatically we now can see how our poor financial situation is affecting our ability to handle outside economic threats…and security. According to the LA Times:

China’s push for oil in Gulf of Mexico puts U.S. in awkward spot

A Chinese company’s gambit to drill for oil in U.S. territory demonstrates China’s determination to lock up the raw materials it needs to sustain its rapid growth, wherever those resources lie.

The state-owned China National Offshore Oil Corp., or CNOOC, reportedly is negotiating the purchase of leases owned by the Norwegian StatoilHydro in U.S. waters in the Gulf of Mexico, the source of about a quarter of U.S. crude oil production.

China’s push to enter U.S. turf comes four years after CNOOC’s $18.5-billion bid to buy Unocal Corp. was scuttled by Congress on national security grounds. The El Segundo oil firm eventually merged with Chevron Corp. of San Ramon.

There is some question about what will happen this time around. The speculation in the piece is that due to our economy and the need for cooperation between the U.S.and China, there may not be any real backlash to the current deal.

In addition, since the U.S. has welcomed oil investments in the Gulf of Mexico from other foreign companies, such as Britain’s BP, Brazil’s Petrobras, France’s Total and Shell (Dutch), as well as others, saying “no” to the Chinese may get a little sticky.

But most serious are  the foreign policy implications of China’s moves:

The U.S. risks undercutting its foreign policy goals as well. Concern is growing over China’s aggressive investment in oil-rich nations with anti-U.S. regimes, including Iran and Sudan. Denying China a shot at drilling in U.S. waters would only encourage Beijing to make deals in volatile regions given that new oil reserves in stable, democratic nations are getting harder to find.

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Gee, do you get the feeling that things are closing in on us a bit?

Will Congress have any response?  Will there be any leadership from the Obama Administration?  What will Hillary Clinton be thinking and how much leeway will she have in dealing with the situation?  Or will she be ordered to sit on her hands?

Time will tell…


Iraqi Oil Contract Bidding: BBC vs. NPR Reporting

~~By InsightAnalytical-GRL

Here’s a little nugget for you regarding the bidding on Iraqi oil fields…the ones that the U.S. was supposed to clean up on after the “liberation” of Iraq.

It’s also a tale of the miserable news reporting we have here, including the “superior” NPR Radio.

I woke up and listened to the BBC World Service yesterday as usual and heard a brief report about bidding for Iraqi oil contracts.  The report included the facts that bidders weren’t exactly running to invest in Iraq.

From the BBC:

Oil companies reject Iraq’s terms

Only one of the bidders for the eight contracts to run oil and gas fields in Iraq has accepted oil ministry terms.

Six oil fields and two gas fields were available in a televised auction that was the first big oil tender in Iraq since the invasion of 2003.

BP and China’s CNPC agreed to run the 17 billion barrel Rumaila field after Exxon Mobil turned it down.

Iraq has asked the rest of the companies to consider resubmitting bids for the other seven contracts.

The oil ministry is offering 20-year service contracts.

Other fields have failed to find buyers, either because there were no bidders or because terms were declined.

Thirty-two oil companies had been approved as potential bidders.

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The terms, of course, are detailed in the story, but suffice to say that the amount of payment is one of the key issues.  Another twist is that these are not “production-sharing” deals, but “service contracts” being offered because the Iraqi parliament hasn’t passed an oil bill yet and this sort of contract makes it easier to start the process at this point.  Under service contracts, a fixed fee will be paid for oil produced instead of having a proportion of the oil awarded to a company under a production-sharing contract.

So, things aren’t proceeding that quickly on the oil production front.

However, I caught a report on NPR which didn’t provide that information. Instead, the report simply mentioned that Iraqi oil bidding had started.

If you look at the story on the NPR site, you’ll see a fuller report, with the emphasis on being a lot more “touchy-feely.”

Foreign Companies Bid On Iraqi Oil Licenses

Morning Edition, June 30, 2009 · Foreign companies could soon be pumping Iraqi oil for the first time in nearly 40 years.

On Tuesday, the government of Iraq opened bids from oil companies interested in helping the country realize its oil production potential.

The oil companies are so eager for a crack at Iraq’s vast oil wealth that they are willing to overlook some big negatives: It’s a country still at war. There’s a lot of political opposition to foreign oil companies. There’s no guarantee the contracts awarded at this auction will even be honored. And yet, more than 30 companies submitted bids.

Big Oil has not had an opportunity like this for decades.

A bit later in the story, we do get some reality:

When Saddam Hussein kicked the foreign oil companies out of Iraq in 1972, many Iraqis supported the move, and there is still strong opposition to any sharing of the country’s oil wealth with foreign companies. The withdrawal of U.S. combat troops from Iraqi cities and towns this week has only reinforced Iraqi nationalism. In the coming weeks or months, Iraqi parliamentarians may even move to overturn oil contracts awarded through Tuesday’s auction.

But there’s hope:

The opening round produced only one deal. The Iraqi offers generally fell short of the oil company bids, and additional bargaining seemed likely.

Such deals won’t necessarily be highly profitable for the oil companies. In the next phase of the competition, however, the Iraqi government is expected to open fields that have not yet been explored or developed. The companies that win the right to search for oil might then be able to take a share of what they find. It’s that competition — not this one — that would mean big money for the companies.

“This is just everybody kind of wanting to get their foot in the door for the bigger prizes that will be here in a year or two,” says Stratfor’s Zeihan. No one wants to be left out.

“What makes Iraq special,” says Diwan, “is [that] there is room for all the big oil companies at the same time, and for all them to have sizable projects. Everybody will get something fairly large.”

All this may be very true, but if you only caught the brief headline story that I heard on the radio later in the day, you wouldn’t have a clue about the first day of bidding.

The question is, of course, why a news brief on the BBC can include fact that there was a difficult first day of bidding, while the NPR brief omits this information.

That’s a silly question, of course, because we all know that Americans are not allowed to get news, just spin and and obsfucation.