Oil and Gas

At this State of the Union address, President Obama proudly stated that “American oil production is the highest it’s been in eight years” and declared that his Administration would “open more than 75 percent of our potential offshore oil and gas resources.” While President Obama spoke favorably of the role that oil and gas development play in America, the President’s and his Administration’s actions don’t match with his words.

There are several areas where the President and his Administration are unreasonably hindering access to more oil and gas for Americans and threatening the industry with punitive measures:

• Keystone permit rejection. The Keystone XL pipeline would deliver oil from our Canadian ally, relieve some of the pain of high prices at the gas pump, and create jobs in America. Nevertheless, and despite a State Department environmental review concluding that the project poses no significant environmental risk, the President chose to reject TransCanada’s permit application to build the pipeline.
• Targeted tax hikes. The President continues to threaten the oil industry with targeted tax hikes. Under the rhetoric of eliminating subsidies for the industry, the President’s proposal would eliminate certain tax treatments for oil that are available to many industries, effectively singling out the oil industry for a tax hike.
• Slowdown of production on federal lands. While American oil production has been increasing, the vast majority of that production is taking place on private lands. Production on federal lands is actually 40 percent lower than it was 10 years ago. The House Natural Resources Committee also reports that under the Obama Administration, 2010 had the lowest number of onshore leases issued since 1984.
• Fracking regulation. Hydraulic fracturing (or “fracking”) is a proven oil and gas extraction process that should not be subject to overly burdensome regulations. The Environmental Protection Agency is currently considering federal regulation of the fracking process under the Safe Drinking Water Act. The problem is that the agency is following a procedure that even the Department of Energy criticized for its “selective focus” on “negative outcomes.”

Words alone will not make energy more abundant and affordable, nor will they create the energy-related jobs that would make the American economy stronger. If the President is truly concerned about increasing America’s energy access, he certainly has a funny way of showing it.

For policies in that direction, Heritage policy analyst Nick Loris explains in two papers how to make gas and electricity prices more affordable and how to create jobs and raise government revenue through energy exploration.

Source material can be found at this site.

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3. Another Free-Money Report

Senior Iranian religious leader Ayatollah Ahmad Khatami said on Friday that Iran is already a nuclear state and that Americans have not realized that.

Iranian flag

“The United States says it will not allow Iran to be nuclear, but it is so blind that it hasn’t noticed that Iran has already become a nuclear state,” Khatami was quoted by Channel 10 News as having said. He added that the U.S. has become isolated in the region, after its four “slaves” were removed from power. He was referring to former Egyptian President Hosni Mubarak, former Libyan strongman Muammar Qaddafi, former Tunisian President Zine al-Abidine Ben Ali and former Yemeni President Ali Abdullah Saleh.

Khatami also addressed the EU’s embargo on Iranian oil imports, which was announced this week, and said that the Europeans decided to wait with the implementation of the sanctions until July because their economic situation is no better than Iran’s.

“Why did the Europeans decide to wait half a year before implementing the sanctions? The answer is simple – the Europeans have their own serious trouble – they were hit by the financial crisis,” he said.

Khatami added the embargo will hurt Europe more than it will hurt Iran, because Saudi Arabia will not be able to provide the required amount of oil to Europe, while the sanctions will only hurt 18 percent of Iran’s oil exports.

Source material can be found at this site.

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Yesterday, President Barack Obama rolled through Las Vegas to push for federal investment in clean energy vehicles, making his pitch at a UPS plant, escorted by a motorcade of 22 fossil fuel-burning vehicles. We haven’t seen anything this ironic since Al Gore hopped on a private jet to promote his global warming flick “An Inconvenient Truth.”

Kudos to our friends at the Nevada Policy Research Institute who captured the moment on video.

[There is a video that cannot be displayed in this feed. Visit the blog entry to see the video.]

Source material can be found at this site.

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Iran continues to claim it is reaping the rewards of European sanctions even amid a deep currency crisis that rocks Tehran.

M Star oil tanker (undated company file photo)

In fact, the oil ministry in Tehran claims the embargo would leave Iran unscathed while inflicting “heavy economic loss” on the “people of Europe, who have been affected by crisis”.

The result would be a “slowdown in global economic growth, particularly in the crisis-hit Western world,” said the statement.

However, the value of the rial, Iran’s national currency, has fallen by around 50 per cent against the dollar in the last month alone as Iran tries to circumvent sanctions by trading in Russian rubles and Chinese yen instead of US dollars and European Euros.

The rial lost 10 per cent of its value in the 24 hours after the European Union’s announcement of oil sanctions.

Heydar Moslehi, the intelligence minister, told Tehran’s official news agency that Iranians would prosper from the sanctions, hailing them as “opportunities” that have “already brought lots of benefits to the country”.

Iranian officials last week had reissued their threat to close the strategically vital Strait of Hormuz, through which much of the world’s oil flows, if the West brought more sanctions to bear against its oil and banking industries. The Bahrain-based US Fifth Fleet has said closing the strait would be “an act of war.”

Britain, America and France responded to Iran’s earlier threats to close the Strait of Hormuz, the vital waterway at the entrance to the Gulf, by sending a joint flotilla of six warships through this channel on Sunday.

Military analysts say that while Iran could briefly close the Strait of Hormuz such a move would likely be a strategic disaster for Tehran, which is asymmetrically outmatched by the US military.

Such a move, they say, could not only lead to an embarrassing and costly US victory over Iran’s naval and air forces, but also trigger a US strike on Iran’s nuclear facilities, which are the focus of Western sanctions.

While sanctions are biting deep, critics of Western leaders say they are unlikely to stop Iran’s bid for nuclear weapons as Iran continues to export oil to China, India, Japan, and Russia.

They note that North Korea, an impoverished international pariah languishing under crippling international sanctions, has succeeded in detonating two nuclear devices, to date.

Source material can be found at this site.

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1. Iran Scoffs at Western Sanctions; Continues With Nuclear Weapons Program
2. U.S. Sanctions Three Companies for Selling Oil Products to Iran
3. Iran Vows Revenge Against Israel, US and UK

On Wednesday, president Obama rejected the TransCanada’s permit application to construct a 1,700-mile pipeline from Alberta, Canada, to Texas refineries. Join us on Friday from 12-1 for our “Lunch with Heritage” chat. We will be joined by Heritage’s energy expert Jack Spencer. He will be taking your questions about why the decision was made, what the ramifications of his decision are and what should done in the future about energy. If you can’t make it to the chat leave a question in the comments and we will try and answer it for you. If you would like to be reminded about the chat please leave your email address in the form below.

Source material can be found at this site.

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Iranian Ambassador to South Korea Ahmad Masoumifar on Wednesday said there is a high demand for Iran’s crude oil supplies and Tehran has no problem maintaining exports.

Crude oil tanker

Masoumifar also shrugged off Iran’s shrinking pools of customers, saying “we (Iran) are producing about 80 million barrels [of oil] and there is demand for about 90 million.”

In a Tuesday interview with The Korea Times, he said US sanctions are “a dangerous idea” meant to impose Washington’s domestic law internationally.

Masoumifar’s comments came just one day after British foreign minister William Hague told reporters that he and his EU counterparts were working to hammer out the details of sanctions targeting Iran’s oil industry ahead of a January 23 meeting.

While Iran has been able to shore up lost oil contracts by increasing oil exports to China and Russia, Masoumifar’s claim has been widely panned as Iranian propaganda by analysts who note Iran would not have threatened to close the Strait of Hormuz in the event of further Western sanctions if they were not taking their toll.

The Iranian rial has been struggling as Iran’s Western currency reserves run thin and its export markets narrow. A brief surge in the rial following US sanctions, which have yet to be fully implemented, was killed when President Mahmoud Ahmadinejad refused to raise interest rates.

Market analysts predict EU sanctions would result in a further weakening of the Iranian rial, should they be imposed.

Western experts, however, say that more sanctions are unlikely to deter Iran from its drive to obtain nuclear weapons. On Wednesday, former US ambassador to the UN John Bolton warned that North Korea – languishing in deep poverty under heavy sanctions – managed nonetheless to detonate two nuclear devices.

Iran denies it is seeking nuclear weapons, but the International Atomic Energy Agency has reported Tehran has sought — and continues to seek — nuclear technology with solely military applications.

Israel, the West, and Iran’s Gulf Arab rivals have taken Iran’s refusal to allow IAEA inspectors access to its nuclear facilities under the Nuclear Non-Proliferation Treaty –- to which it is a signatory -– as a sign of bad faith.

Nonetheless, more Western sanctions will not hamstring Iran’s oil exports as they do not compel non-Western nations to abide by them. Additionally, Russia has vowed to veto any attempts at universal sanctions on Iran at the United Nations.

Source material can be found at this site.

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Even as Western officials try to tamp-down the drums of war with Iran amid spiking oil prices, Saudi Arabia says it is ready to go to war to defend its interests.

Turki al Faisal

Former Saudi intelligence chief Prince Turki al-Faisal told delegates at a Gulf Cooperation Council conference that Riyadh will use “all available options” to defend itself against Iranian “threats” that might trigger “unwanted military confrontation.”

Al-Faisal’s comments to the conference in Bahrain late on Tuesday came after Tehran demanded Riyadh rethink its offer to make up for any oil lost to world markets as a result of threatened curbs on Iranian exports.

“Any threat to our interests or security will force us to use all available options to defend our interests, and national and regional security,” Faisal was quoted as saying by the Al-Arabiya news channel.

“The mounting escalation and persistent tensions might end up in an adventure with unpredictable consequences or in an unwanted military confrontation.”

Iran has warned Western governments that it will close the strategically vital Strait of Hormuz at the mouth of the Gulf, a strategic choke point for much of the world’s oil supplies, if they press ahead with sanctions against its key crude exports.

“Iran must not fuel this conflict and must not threaten us when we commit to international decisions,” Faisal said. “It must safeguard the security of the Strait of Hormuz and that of the world energy supply.”

But Iran, “our partner in achieving the objective of security across the region, based on peaceful foundations, has chosen a different policy that constantly undermines regional security and provokes foreign interventions, which it claims it is trying to get rid of,” he said.

Sanctions against Iran stem from Tehran’s drive for nuclear weapons. Iran denies the charge, but the International Atomic Energy Agency filed a report saying Tehran has sought – and continues to seek – nuclear technology that only has military applications.

The report, combined with Iran’s repeated refusal to allow IAEA inspectors access to its nuclear sites under the Nuclear Non-Proliferation Treaty, has led to concern among Western nations, Saudi Arabia and its Gulf Arab allies, and Israel over Iran’s nuclear ambitions.

Nevertheless, US president Barack Obama who is now entering a re-election cycle is keen to avoid a confrontation in the Persian Gulf and skyrocketing oil prices.

Obama said in a letter this week he was ready to enter talks with Iran over its nuclear program despite there having been no direct diplomatic ties between Tehran and Washington, but cautioned that closing the Strait of Hormuz would be crossing a ‘red line.’

The Bahrain-based US Fifth Fleet has said any such move would be “an act of war.”

NATO officials indicated on Wednesday the alliance has no intention of intervening militarily in the Persian Gulf. NATO is presently planning to open a liaison office with the Gulf Cooperation Council in Kuwait City.

Also on Wednesday, Israeli Minister of Defense Ehud Barak said an Israeli strike on Iran’s nuclear program was ‘very far off.’ However, Barak has also said there are red-lines, such as Tehran reaching high levels of uranium enrichment, which would force Israel to strike.

Nonetheless, al-Faisal’s comments now mean the Obama administration has two potential wild cards to deal with – both Israel and Saudi Arabia – as he prepares for an election against a field of Republican challengers competing to prove they are the toughest on a regime Washington has long regarded as a pariah state.

Source material can be found at this site.

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Enraged Iranian officials are vowing retaliation against Israel, the US and the UK over the latest assassination of a nuclear scientist, 32-year-old Mustafa Ahmadi Roshan, in Tehran.

Iranian President Mahmoud Ahmadinejad

A former Iranian ambassador who served in Mexico and Italy recommended that an American being held in Tehran be executed in retaliation for the assassination. “The terrorist attack on the scientist must not be left unanswered and therefore it is advisable to immediately execute [the suspected CIA spy [Amir Mirzai Hekmati] at the site of the explosion,” recommended former Ambassador Mohamed Hassan Qadiri in a post on his blog.

He added that had Iran not released two Americans in September 2011 who were also charged with espionage, they too could have been executed.

Hekmati, an American of Iranian descent, had been arrested by Iranian intelligence personnel who claimed he was spying for the CIA. His father, a professor in Michigan, told reporters that the ex-Marine was visiting his grandmothers in Iran when he was picked up by Iranian security forces.

Iran’s Press TV quoted armed forces chief Brig.-Gen. Massoud Jazayeri on Sunday as saying, “The opponents of the [Islamic] Revolution and the nation’s progress should have no doubt that the punitive response to the U.S., the Zionist regime and their criminal accomplices will be delivered in an opportune time.”

Jazayeri expressed particular anger at the United Nations International Atomic Energy Agency (IAEA), which he said had endangered Iranian nuclear scientists by releasing their names to the public where they could be found by “supporters of state terrorism.”

The UK said Sunday, meanwhile, that it will continue to support European Union sanctions against Iran. “We have never ruled anything out,” British Foreign Secretary William Hague told Sky News television. “We have not ruled out any option, or supported any option. We believe all options should be on the table – that is part of the pressure on Iran. But we are clearly not calling for, or advocating, military action,” he said.

Israel’s Deputy Prime Minister Moshe Ya’alon, meanwhile, noted with some disappointment that 2012 presidential election year considerations appeared to be guiding the decisions of the White House vis a vis Iran.

France and Britain “are taking a very firm stand and understand that sanctions must be imposed immediately,” Ya’alon pointed out. But U.S. President Barack Obama left loopholes in the measures he signed on December 31 imposing sanctions against the Islamic Republic’s central bank and oil export.

Iran has been playing chicken with the United States and Western nations through military drills that President Mahmoud Ahmadinejad said will culminate in an exercise designed to “tune up” Iran’s military capability to close the Strait of Hormuz at a moment’s notice. The waterway is the sole shipping lane for some 40 percent of the Western world’s oil supplies.

Source material can be found at this site.

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Washington on Thursday placed sanctions on three companies from China, Singapore and the United Arab Emirates for selling refined oil products to Iran, AFP reported.

Nuclear Iran

The Treasury placed sanctions on Zhuhai Zhenrong Co. of China, which it called the largest supplier of refined petroleum products to Iran, the report said. The sanctions came a day after U.S. Treasury Secretary Timothy Geithner met Chinese leaders on how to boost pressure on Tehran to halt its nuclear weapons program.

The other two companies to be hit with sanctions were Singapore trader Kuo Oil and the UAE’s FAL Oil Co., AFP reported.

Under the sanctions, all three companies are barred from receiving U.S. export licenses, trade support from the U.S. Export Import Bank, and loans over $10 million from U.S. financial institutions.

According to the Treasury, Zhuhai Zhenrong brokered the delivery of more than $500 million in gasoline to Iran between July 2010 and January 2011, far higher than thresholds the U.S. had set for allowable deals.

Kuo, the Treasury said, did $25 million in refined petroleum business with Iran in late 2010 and early 2011, while FAL provided $70 million in refined products to Iran in late 2010, also breaking the thresholds.

“The United States is working with international partners to maintain pressure on the Government of Iran to comply with its international nuclear obligations,” the Treasury was quoted as having said.

Earlier on Thursday, Iran said it was ready to discuss allegations that it was involved in secret nuclear weapons work.

The announcement comes after years in which Iran blocked the IAEA’s attempts to follow up on U.S. and other intelligence alleging covert Iranian work on nuclear arms for more than three years. The Islamic Republic dismissed the charges as baseless and insisted its nuclear activities were peaceful and under IAEA purview.

A senior UN nuclear agency team will visit Tehran on January 28 following Iran’s announcement.

In November, the IAEA released a report saying it had credible intelligence Iran is seeking nuclear weapons technology.

Source material can be found at this site.

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The United Arab Emirates says ensuring free and safe navigation in the Strait of Hormuz is the responsibility of all major importers of oil.

Strait of Hormuz

The position was laid out by UAE Foreign Minister Sheikh Abdullah Bin Zayed Al Nahyan on Tuesday during a visit from Japanese diplomats.

“This isn’t just the responsibility of the Gulf Cooperation Council,” al-Nayhan reportedly told his Japanese counterpart Koichiro Gemba on Tuesday.

“No party, be it the Gulf Cooperation Council countries, Iran or the international community, will benefit from the blocking of international waterways,” Shaikh

Al-Nayhan’s remarks were in reference to recent threats by Iran to close the strategically vital Strait of Hormuz though which a third of the world’s oil flows.

The United States responded saying any attempt to close the strait of Hormuz would be regarded as “an act of war” and would “not be tolerated.”

Military analysts say that Iran could only keep the vital waterway closed for a brief period before facing an overwhelming military reaction from the US and its allies.

Even so, such a closure would likely have disastrous short-term effects for the global economy.

Gemba agreed that Iran should not threaten to block the Strait of Hormuz, but refused to commit his nation to taking action on behalf of Gulf states should Iran attempt to make good on its threat.

Saudi Arabia supplies 30 per cent of Japan’s oil imports, with another 20 per cent coming from the UAE, 10 per cent from Qatar and 9 per cent from Iran.

Meanwhile, an oil export pipeline from Habshan oil terminal in Abu Dhabi to Fujairah that will bypass the Strait of Hormuz will be ready by the middle of 2012.

Source material can be found at this site.

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