Taking stock of ISIS oil

Matthew M. Reed writes: The early estimate for ISIS oil revenues was $2-3 million a day. Media coverage ran with that number and so did U.S. officials for a time. However, the price/volume assumptions built into it were never clear. “It’s not an estimate that the U.S. intelligence community or the Pentagon is endorsing or has come up with,” a Pentagon spokesman said in September 2014.

The first official U.S. government estimate for ISIS oil revenue came in October last year. Then-Treasury Undersecretary David Cohen estimated that ISIS probably earned $1 million a day in June—before the anti-ISIS coalition intervened. That estimate held up until February 2015 when Cohen said ISIS revenues had fallen to just $2 million a week (or ~$300,000 a day). At that point, U.S. officials became convinced oil was not the top money maker for ISIS; instead the group relied more on taxation, tolls, ransom and theft. Official estimates came with big caveats but the U.S. government apparently believed it had cut down ISIS oil revenues by two-thirds.

That estimate lasted until July, when Treasury’s Assistant Secretary for Terrorist Financing Daniel Glaser concluded that oil ranked third among ISIS revenue streams, but it was still significant. “Earlier this year ISIL made about $40 million in one month, off of the sale of oil. So if you want to extrapolate that out, you get to about $500 million in the course of a year,” he said. $500 million a year works out to almost $1.4 million a day, which is almost a five-fold increase from the lowball claim made in February. (FT estimates revenue at $1.5 million a day as well.) [Continue reading…]

See also Part Two of this report.


Saudis risk draining financial assets in 5 years, IMF says

Bloomberg reports: Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices.

The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said.

Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain. [Continue reading…]


Saudi Arabia targets Russia in battle for European oil market

Reuters reports: From global majors such as Shell and Total to more modest Polish energy firms, oil refiners in Europe are cutting their longstanding use of Russian crude in favour of Saudi grades as the world’s top exporters fight for market share.

Russia has for years been muscling in on Asian markets where Saudi Arabia was once the unchallenged dominant supplier. But now Riyadh is retaliating in Moscow’s backyard of Europe with aggressive price discounting.

This has nothing to do with Western sanctions imposed on Russia over Ukraine, which apply to energy industry equipment but not to oil or gas itself. Instead it is a commercial battle for customers as both exporters ramp up their output despite weak world oil prices. [Continue reading…]


Oil nations feel the strain of  OPEC’s continuing price war

The Telegraph reports: Oil is arguably Saudi Arabia’s best weapon against both Russia and Iran. Although the kingdom’s finances are under severe strain from the collapse in export revenues it can still fall back on its $655bn (£423bn) of foreign assets while Russia and Iran will feel the impact of another year of weak oil prices more acutely.

After a year of carnage in the oil industry, it is now clear that it will take more time for Al-Naimi’s strategy of allowing weaker prices to do the job of totally shutting down higher cost producers.

A 60pc slump in oil prices since last November has caused havoc but the main target of Opec ‘s campaign, shale oil in the US, has so far proved to be remarkably resilient.

Hardest hit have been the high cost producers in areas such as the North Sea where prices below $50 per barrel have placed the entire offshore industry at risk.

Energy consultant Wood Mackenzie now fears that 140 fields in the waters off north-east Scotland, where oil has been pumped since the 1970s, could be closed down over the next five years if oil prices remain so low. [Continue reading…]


Indigenous Canadians take leading role in battle against tar sands pipeline

The Guardian reports: Chief Na’Moks stood in the dark of a small smokehouse nestled in the Coast range of British Columbia. Hanging above him were nearly a thousand fish which glinted over the fire below.

“For us, it’s one of the most highly prized commodities that we have,” he said, pulling one of the glistening candlefish off the rack. “People don’t get why we want to keep what we have. We don’t want anything from anyone. We just want to keep what we have.”

Not so long ago, the chief’s ancestors traded fish oil along the grease trails up and down the coast of British Columbia. Today, however, Chief Na’Moks and many other First Nations leaders are at the forefront of a struggle against a very different kind of oil business: Canada’s largest proposed tar sands pipeline, the Northern Gateway.

It is the country’s environmental battle of the decade, uniting a wide variety of citizens’ groups against the billions of dollars of investment by oil companies and millions in secret funding from the government. First proposed in 2004, the Enbridge Northern Gateway pipeline was planned for a 731-mile (1,177km) stretch from the center of Alberta to the coast of British Columbia. [Continue reading…]


How ISIS became a petrostate

The Financial Times reports: Minutely managed, Isis’ oil company actively recruits skilled workers, from engineers to trainers and managers.

Estimates by local traders and engineers put crude production in Isis-held territory at about 34,000-40,000 bpd. The oil is sold at the wellhead for between $20 and $45 a barrel, earning the militants an average of $1.5m a day.

“It’s a situation that makes you laugh and cry,” said one Syrian rebel commander in Aleppo, who buys diesel from Isis areas even as his forces fight the group on the front lines. “But we have no other choice, and we are a poor man’s revolution. Is anyone else offering to give us fuel?”

Isis’ oil strategy has been long in the making. Since the group emerged on the scene in Syria in 2013, long before they reached Mosul in Iraq, the jihadis saw oil as a crutch for their vision for an Islamic state. The group’s shura council identified it as fundamental for the survival of the insurgency and, more importantly, to finance their ambition to create a caliphate. [Continue reading…]


Oil shock: Fears of unrest in petro economies as oil prices drop

The New York Times reports: While the price has been declining for months, forecasts have always been hedged with the assumption that oil would eventually stabilize or at least not stay low for long. But new anxieties about frailties in China, the world’s most voracious consumer of energy, have raised fears that the price of oil, now 30 percent lower than it was just a few months ago, could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters.

“The pain is very hard for these countries,” said René G. Ortiz, former secretary general of the Organization of Petroleum Exporting Countries and former energy minister of Ecuador. “These countries dreamed that these low prices would be very temporary.”

Mr. Ortiz estimated that all major oil exporting countries had lost a total of $1 trillion in oil sales because of the price decline over the last year.

“The apparent weakness in the Chinese economy is radiating out into the world,” said Daniel Yergin, the vice chairman of IHS, a leading provider of market information, and the author of two seminal books on the history of the oil industry, “The Prize” and “The Quest.”

“An awful lot of producers who enjoyed good times were more dependent on Chinese economic growth than they recognized,” Mr. Yergin said. “This is an oil shock.”

Although the price drop has most directly hurt oil exporters, it also may signal a new period of global economic fragility that could hurt all countries — an anxiety that already has been evident in the gyrating stock markets.

The price drop also has become an indirect element in the course of Syria’s civil war and other points of global tension. Countries that once could use their oil wealth as leverage, like Russia, Iran and Saudi Arabia, may no longer have as much influence, some political analysts said. Iran, which once asserted it could withstand the antinuclear embargo of its oil by the West, appeared to have rethought that calculation in reaching an agreement on its nuclear activities last month. [Continue reading…]


Arctic drilling approval threatens Obama’s climate legacy

InsideClimate News reports: The Obama administration’s final approval of Royal Dutch Shell’s drilling for oil in Alaska’s Chukchi Sea provoked an angry reaction on Monday from environmentalists who had come to consider President Obama a champion in the fight against climate change.

The decision comes two weeks after the release of the United States’ most aggressive attempt to limit greenhouse gas emissions, known as the Clean Power Plan, and just days after Obama announced he will visit Alaska later this month to highlight the impacts of climate change, which he recently referred to as “one of the greatest challenges we face this century.”

“I’m flummoxed,” said Jamie Henn, co-founder and director of strategy and communications of the green group 350.org. “Arctic drilling is so blatantly out of line with the President’s stated goals that the only possible explanations seem to be that he truly doesn’t understand the issue or that the White House is somehow convinced that the project won’t go forward.” [Continue reading…]

Mashable reports: The warmest year on record so far may have claimed another milestone, and this time it’s a big one.

According to preliminary data from NASA along with information from the Japan Meteorological Administration, July 2015 was the warmest month on record since instrument temperature records began in the late 1800s.

Research using other data, such as tree rings, ice cores and coral formations in the ocean, have shown that the Earth is now the warmest it has been since at least 4,000 years ago. [Continue reading…]


Oil demand will dry up faster than oil supply

Amory Lovins writes: Why would anyone want to be in the oil business? Like airlines, it’s a great industry but a bad business. Here are the most obvious challenges to its business model:

  • Oil companies are extremely capital-intensive; they can’t charge a high enough price to pay for Arctic oil because to deliver energy at a given rate takes more capital investment than photovoltaics do.
  • They have decadal lead times and high technological, geological, and political risks.
  • National oil companies own about 94 percent of global reserves and can take or tax away the major oil companies’ remaining 6 percent at any time, holding their most basic assets and expected profits at risk.
  • Resource owners force major oil companies into riskier and costlier plays even as investors demand lower risks and higher returns.
  • The industry is politically fraught, unpopular, interfered with, and reputationally damaged by its worst actors.
    Its service companies (like Schlumberger and Halliburton) and the national oil companies are becoming formidable competitors.
  • Its permanent subsidies are coming under greater scrutiny and criticism.
  • It must sell its products at world oil prices that are highly volatile and beyond its control.
  • Much of the reserve base underlying its market valuation is unburnable for climate reasons, potentially wiping trillions off balance sheets.
  • The costly Arctic, deep-sea, and otherwise remote reserves that until a year ago got half the new investments by the biggest oil companies are also economically stranded assets  — at least four times costlier than demand-side competitors and increasingly challenged even by some supply-side competitors.

What a recipe for headaches! No wonder savvy investors are starting to shift their money into assets with rapid growth, wide benefit, solid public acceptance and even enthusiasm, modest risk, and durable value. Energy efficiency and renewables lead the pack. Increasingly they poach investment, momentum, and people from major companies’ deep talent pools. Even my own nonprofit organization’s CEO is a ten-year Shell veteran.

Yet I think these widely recognized challenges are easier to handle than others the industry is only just starting to realize. Having advised oil companies for 42 years, I’m worried that many don’t yet grasp how their competitive landscape is being transformed far faster than their cultures can comprehend or cope with.

Most importantly, their demand is going away — not incrementally but fundamentally. Like whale oil in the 1850s, oil is becoming uncompetitive even at low prices before it becomes unavailable even at high prices. [Continue reading…]


Scientists call for halt to Canadian oil sands expansion

Climate Central reports: The controversial proposed Keystone XL Pipeline put Canada’s vast carbon-laden tar sands on the map for many Americans, with its builders promising that it would carry 800,000 barrels of petroleum per day from Alberta’s tar sands to oil refineries in Texas.

But a group of 100 scientists on Wednesday called for a moratorium on further oil sands development, saying it isn’t compatible with stabilizing the climate and meeting greenhouse gas emissions reductions targets.

“We shouldn’t be doubling down or quadrupling down on the tar sands going from 2 million barrels per day to four, six, eight as industry is calling for by proposing expansions and proposing pipelines,” Simon Fraser University energy economist Mark Jaccard said.

Many scientists, environmental groups and President Obama have voiced concern about the effect of tar sands, or oil sands, on the climate. The U.S. State Department concluded that oil sands are more than 17 percent more carbon-intensive to extract than the average barrel of oil.

The Canadian Association of Petroleum Producers announced Tuesday that oil sands will account for most of a 43 percent increase in Canadian crude oil production through 2030. Production is expected to grow from 3.7 million barrels per day to 5.3 million barrels. Of those, 4 million barrels will come from oil sands. [Continue reading…]


How to blow the fight against climate change

Bill McKibben writes: If historians someday need to explain how mankind managed to blow the fight against climate change, they need only point to last month’s shareholder meeting at Exxon Mobil headquarters in Dallas.

The meeting came two days after Texas smashed old rainfall records — almost doubled them, in some cases — and as authorities were still searching for families swept away after rivers crested many feet beyond their previous records. As Exxon Mobil’s Rex Tillerson — the highest-paid chief executive of the richest fossil fuel firm on the planet — gave his talk, the death toll from India’s heat wave mounted and pictures circulated on the Internet of Delhi’s pavement literally melting. Meanwhile, satellite images showed Antarctica’s Larsen B ice shelf on the edge of disintegration.

And how did Tillerson react? By downplaying climate change and mocking renewable energy. To be specific, he said that “inclement weather” and sea level rise “may or may not be induced by climate change,” but in any event technology could be developed to cope with any trouble. “Mankind has this enormous capacity to deal with adversity and those solutions will present themselves as those challenges become clear,” he said.

But apparently those solutions don’t include, say, the wind and sun. Exxon Mobil wouldn’t invest in renewable energy, Tillerson said, because clean technologies don’t make enough money and rely on government mandates that were (remarkable choice of words) “not sustainable.” He neglected to mention the report a week earlier from the not-very-radical International Monetary Fund detailing $5.3 trillion a year in subsidies for the fossil fuel industry. [Continue reading…]


Fossil fuel divestment is rational, says former Shell chairman

The Guardian reports: The former chairman of Shell has said that investors moving their money out of fossil fuel companies is a rational response to the industry’s “distressing” lack of progress on climate change.

Sir Mark Moody-Stuart, who spent almost four decades at Shell and rose to be its chairman, also said the big oil and gas companies had been calling for a price to be put on CO2 emissions for 15 years but had done little to make it happen.

His striking remarks are the most supportive of divestment made by any senior figure in the fossil fuel business. They will also be chastening for Shell. The company is currently positioning itself to be part of the solution to climate change rather than part of the problem, but faces criticism of its Arctic and tar sands operations.

Moody-Stuart, a geologist, spent 39 years in Shell, finally stepping down in 2005, and was chairman of mining giant Anglo American from 2001 to 2009.

He was gloomy about the prospects of the world beating global warming. “I have met precious few people who think we will stay within 2C,” he said. “But one encouraging sign is a much higher level of interest from investors.” The shareholder resolutions passed recently asking Shell and BP to provide more information on their responses to climate change would not have happened 10 years ago, he said.

But he also approved of fossil fuel divestment, a fast-growing and UN-backed campaign to persuade investors to dump their stocks, on the basis that current reserves of coal, oil and gas are already several times greater than could be safely burned. The Guardian’s Keep it in the Ground campaign is highlighting the divestment argument and calling on the world’s two largest medical charities – the Bill and Melinda Gates Foudnation and Wellcome Trust – to divest their endowments from fossil fuels. [Continue reading…]


Major European oil companies call for carbon price

Big Oil — also known as the supermajors — refers, in order of size, to Exxon Mobil, Royal Dutch Shell, BP, Chevron, Total, and ConocoPhillips. Three American companies and three European companies.

It was only the latter three — Shell, BP, and Total — that added their names to a letter, saying: “We want to be a part of the solution and deliver energy to society sustainably for many decades to come.”

Climate Central reports: In a stunning reversal of years of obstructionism to creating a global framework to deal with climate change, CEOs from global oil and gas behemoths Shell, BP, Total, Statoil, Eni and the BG Group have signaled that they’re ready for a price on carbon.

The CEOs of the companies, with nearly $1.4 trillion in annual revenue, sent a letter on Friday, which was released publicly on Monday, to Christiana Figueres, the United Nation’s climate chief, as well as Laurent Fabius, France’s Foreign Affairs and International Development Minister who will also lead the Paris climate talks later this year.

In it, they ask for national and regional governments to set a price on carbon and for those regional carbon markets to be linked.

“We need governments across the world to provide us with clear, stable, long-term, ambitious policy frameworks,” the letter states.

The timing of the letter is no coincidence. Representatives from 190 countries are meeting in Bonn, Germany this week to continue hammering out details for an international climate agreement that is expected to take shape by the end of the year. [Continue reading…]


Fort McKay: The Canadian town that sold itself to tar sands

The Guardian reports: Amid the strip mines and steam plants sprawled across the northern Alberta wilderness, Fort McKay is just a tiny dot on the map.

It is also one of the single biggest source sites of the carbon pollution that is choking the planet.

This tiny First Nations community grew rich on oil, and was wrecked by oil. Local Cece Fitzpatrick grabbed what she saw as a last chance for Fort McKay and decided to run for chief, promising to stand up to the industry which came here 50 years ago. [Continue reading…]


The oil companies and the assassins — BP and Ocensa

The Guardian reports: A Colombian trade union leader is beginning an unprecedented claim for damages against BP in the high court in London, alleging the oil company’s complicity in his kidnap and torture 13 years ago.

Gilberto Torres, 52, was abducted in February 2002 while driving home from an oil-pumping station in Casanare, eastern Colombia, and was released after 42 days, only after workers threatened a national oil strike. The case, which begins on Friday, will throw a spotlight on one of the murkiest periods in Colombia’s history, and the role of big business in it.

His lawyers say that it is the first time a union leader has been able to lodge a claim for human rights abuses against a multinational oil company in the high court. They believe his claim could pave the way for scores more similar actions.

BP denies any involvement. It says it will “vigorously” defend the claim.

Torres tells his story for the first time in a Guardian online documentary. The film includes the extraordinary testimony of his kidnappers when they finally faced trial. [Continue reading…]