Category Archives: U.S. oil

My DGAP article | Energiewende vs. USA Shale Gas: Can German industry compete?

ImageIn Germany, the impact of the country’s renewable energy transition on the economy is a very hot topic.  Tuesday, Mrs. Merkel’s  new Minister of Economy & Environment (and chair of the Social Democratic Party), Mr. Sigmar Gabriel, declared: “We need to keep in mind that the whole economic future of our country is riding on this,” (NYT, 21Jan14).

Here’ is my article in the DGAP’s (German Council on Foreign Affairs’) IP Journal of 30Dec13  (submitted 24Nov13):

Germany’s Energiewende (renewable-energy transition) is under intense pressure both from consumers facing soaring electric bills and from German manufacturers fretting about their falling energy competitiveness vís-a-vís the US, where manufacturers are benefiting from the boom in cheap natural gas production. What should be done to address these concerns has become a major topic of the CDU-SPD negotiations forming Chancellor Merkel’s new coalition government.  

From the viewpoint of German manufacturers, there are two ways the US shale gas revolution implies a worrisome competitive challenge. First, cheaper natural gas in the US is lowering electricity and other energy costs for American manufacturers, while Germany’s continue to rise. This is especially of concern to energy-intensive industries, where the EU now has 36 percent of world capacity and the US only 10 percent. Secondly, as the US begins to build facilities for export of liquefied gas (LNG), this capacity could have a significant effect on the price of electricity and gas in Asia. … Continue reading at DGAP’s (Deutsche Gesellschaft für Auswärtige Politik e.V.) IP Journal.

China y América Latina: ¿Quién gana y quién pierde? – Petroguía 2014 (Spanish)

Inversiones energéticos de  China en Latino américa.  Nota que Venezuela está en tercer lugar, en contra de las intenciones iniciales de Beijing en 2007-08.

Inversiones energéticos de China en Latino américa. Nota que Venezuela está en cuatro lugar, en contra de las intenciones iniciales de Beijíng en 2007-08. HAZ CLICK para magnificar. (Grafico por T.O’D.)

[English readers: This post is an analysis I did in Spanish for Petroguía 2014 - the annual hard-copy guide for the LatAm petroleum sector - of China's oil and gas investments in LatAm and the Carribean.  For Beijing's other investments, or a presentation, etc. drop me a line. ]

NOTA: La siguiente es mi análisis publicado en Petroguía 2014, la guía anual para el sector petrolífero latinoamericano.  Soy agradecido a los directores del Petroguía por haberme permitido publicar el artículo aquí.  El artículo es una resumen de una investigación que hizo sobre todas las inversiones de China en Latino américa. Si tienen interés en una reportaje o presentación detallada, por favor contactarme.

China y América Latina: ¿Quién gana y quién pierde?

Sumario. El mercado de hidrocarburos ya no está en el norte de América sino hacia el este,  y la mejor estrategia de intercambio con esa plaza la lleva Brasil, mientras que Venezuela y Argentina están a la zaga.

Por Thomas W. O’Donnell

El petróleo y el gas que exportará América Latina en las décadas venideras irán mayormente a China y otras partes de Asia. Y eso es por el efecto combinado de menores necesidades de energía importada en Estados Unidos, gracias a la utilización de los nuevos métodos de fractura hidráulica (fracking) que produce cada vez más petróleo liviano, y por el tope que ha alcanzado su demanda doméstica. Continue reading

My AS/COA piece: PDVSA Post-Chavez: Will Partnerships with the Private Sector and Chinese Experts Boost PDVSA Oil Production?

PDVSA oil rigs in Venezuela (TalCual)

PDVSA oil rigs in Venezuela (TalCual)

Throughout 2012, and especially after President Hugo Chávez’ death in early March 2013, Venezuela’s national oil firm, Petróleos de Venezuela S.A. (PDVSA), has taken measures beyond anything done in the past decade to raise its lagging production. While the likely impact merits cautious analysis, the drivers of the Bolivarian Republic’s scramble for increased oil revenues are clear.  … Continue reading

My talk: JFK Institute, Berlin: How “The Global Barrel” shapes Washington-EU relations

You’re invited to my lecture at The JFK Institute of North American Studies at Freie Universität in Berlin, Germany, Tuesday 6 PM. Here is the flyer, then the Abstract.  Tschüß!

ABSTRACT:

“The Global Barrel”

Today’s globalized market-centered energy system defines Washington’s relations with the EU, Japan and OPEC states Continue reading

Why is Chinese production in Iraq booming, and in Venezuela lagging?

Iraqi oil production has surged. Source: EIA

[Updated/edited 5 June] The New York Times had an interesting article: “China is reaping biggest benefits of Iraqi oil boom” on June 2, 2013.  The question that comes to mind is …

Why is Chinese production in Iraq booming, and in Venezuela lagging?

As late as 2007 and 2008, China clearly intended its investments in Venezuela to be its largest anywhere, to ramp up development of Venezuela’s huge Faja Orinoco extra-heavy oil reserves.  In those years, Iraq was still mired in sectarian war.  Yet, here we are in 2013, with Chinese production in Iraq surging and its companies’ production in Venezuela lagging.  Why?  Let’s first look at the Chinese relationship and logic in Iraq, then in Venezuela.

Geostrategic interests behind profit issue

The NYT article says that Chinese success in Iraq is largely because their oil companies aren’t especially interested in profits because they don’t have to answer to investors demanding higher returns; they just want to secure oil to bring home.

Yes, but one should see that this is also strongly a geostrategic imperative for Beijing. It is true Chinese firms can get along with lower profits, and they also have much more cash than others, which also helps them get in now at small profits for the long run.  However, unlike other firms, they are under specific instructions by Beijing to persist at getting into countries with huge reserves like Iraq and Venezuela because it is in the geostrategic energy interests of Beijing to do so.

Chinese geostrategic motivations to stick in Iraq (and Venezuela)

Before examining the better situation, on the ground, for Chinese firms dealing with Baghdad as verses Caracas, it is important to recognize Beijing won’t ever give up on either state. Beijing is the one power having serious reservations about too much reliance on the US/Saudi-dominated “global barrel” market-and-security system.  It is the only major power (aside from Russia) with aspirations to project power against the USA and its naval carrier fleets, at least in its near-home waters.  For any such confrontation of any duration, it needs  to have a certain significant percentage of oil brought directly home independent of the USA and the global market the USA dominates.  So, China’s energy firms tend to blend their deepening integration into global oil-market processes with old-fashioned bi-lateral mercantilist relationships with producing states like Iraq and Venezuela. (See also the Addenda below.)

Different contractual and working relationships in Iraq and Venezuela

Venezuelan oil production has lagged. EIA 2012

Chinese firms are clearly more willing to work with the difficult  resource-nationalistic conditions imposed by the Iraqi and Venezuelan states.  However, in many ways Iraq’s are more difficult, yet Chinese–and many others–do better getting production going in Iraqi than Venezuela.  Why? Continue reading

En Espanol: Venezuela’s “Tal Cual” on my al-Naimi post

For Spanish speakers: below is an article from Tal Cual daily in Venezuela summarizing my blog on Saudi oil minister al-Naimi’s opinons on the “North American tight-oil revolution” and their implications for Venezuela and Iran.  The article is by Jose Suarez Nunez.

Para hispano parlantes: Aquí abajo está un artículo en Español publicado en Tal Cual de Caracas, un resumen de mi blog de la última semana que trató en las opiniones del ministro de energía saudita Sr. al-Naimi, y en las implicaciones para Venezuela e Irán. Continue reading

Listening to Saudi Oil Minister Al Naimi at CISIS in Washington: Bad news for Venezuela & Iran?

Al-Naimi at CSIS

Al-Naimi at CSIS

 Last week in Washington, I attended a talk by Saudi Oil Minister and head of Aramco, Ali al-Naimi, at CSIS.  Energy and foreign policy veterans from Daniel Yergin to Brent Scowcroft and Dr. James Schlesinge were on hand to hear al-Naimi’s views. You can read the transcript here, or watch the video embedded below.

Al-Naimi’s contrasted his central theme: “the enduring relevance of oil,” to the predictions made for many years by the adherents of “peak oil”–a theory that he said had itself “peaked in 2009” and has now been shown to be “utterly incorrect.”

Bad News for Venezuela and Iran?

Listening to him describe the global impact that the U.S.A. tight-oil “revolution” will have on the market,  plus with Alberta’s heavy oil and so many other new sources from around the globe all coming to market, brought to my mind images of the 1980′s.  The 1980′s were the “lost decade” in Latin America. It strikes me that, if he’s right about the trajectory of the global oil sector, the consequences for OPEC’s “price hawk” faction would be sobering. Continue reading

As Chavez’ oil alliance with China gets serious, Beijing holds PDVSA to its word

Groundbreaking at CNPC refinery for PDVSA heavy oil, set tol be China's largest.

Groundbreaking, PetroChina-CNPC refinery for PDVSA heavy oil. It is to be China’s largest. (April 2012)

Over the past few weeks, I have been looking at the state of the Venezuelan-Chinese oil alliance that Hugo Chavez has so fervently championed.  The picture that emerges is not what one might expect. Here is an overview, in qualitative terms. [Correction: I originally wrote Ramirez reported that PDVSA produced "60,000" new barrels of Faja oil in 2013. He actually said "20,000".]

A. Structural Changes – Vertical Integration with China

Till now, commentators have looked primarily at the obligations of the Bolivarian Republic of Venezuela (BRV) to send oil to China to repay Beijing’s huge loans.  However, there are major changes afoot in the structure of this relationship, no matter who succeeds Hugo Chavez.  Developments on the ground in both countries show an energy infrastructure buildup will soon bring significant cross-border vertical integration.  Soon, Venezuelan oil will not be shipped to China simply to fulfill financial-and-contractual obligations, but also for locked-in infrastructural reasons. 

All indications are that the Chinese side is actively fulfilling the obligations it entered into ca. five years ago (esp. December 2007) to build oil tankers, pipelines and refineries in China in order to import and process Venezuelan heavy crude.

Continue reading

Problems of the Global Oil System: Why teach about oil?

Oil pumpjacks in Venezuela (TalCual Digital, Caracas)

Recently, I sent off a proposal for a new course, “Problems of the Global Oil System.”  The introduction asks rhetorically: “Why Teach About Oil?”

Debates in the U.S. over oil and energy policy often resemble election campaigns, fought out with factoids and unconstrained partisanship.  Of course, deciding technical-scientific policy is inherently political.  But there are politics and there are politics.  In the proposal, I argue that  “Oil’s persistent domestic & global centrality” will extend at least another 25-to-30 years, so teaching about oil is necessary to  empower students to participate in forming energy policy democratically.

But, do the facts actually support the conclusion that petroleum’s central role in society–in both domestic and international affairs–will persist for at least 25-30 years hence?  Here is the brief argument in the introduction (and the conceptual outline of the course) for your consideration: Continue reading

I’m cited: “(BN) Chavez Buys Enemy U.S.’s Fuel While Lauding Iran”

Presidents Chavez and Ahmadinejad met in Caracas in January (here) and June 2012

I was cited a number of times yesterday in a Bloomberg News article by Nathan Crooks in Caracas and Paul Burkhardt in NYC.  I reprint it below because the authors’ research further illustrates an issue I’ve often stressed here.

That is: in spite of President Chavez’ rhetoric promising to stand by Presidents Ahmadinejad of Iran (and Assad of Syria, and previously Qaddafi of Libya), he is actually in no position to withstand the U.S. sanctions that could be imposed on Venezuela for aiding Iran. Continue reading