[DEBATE] : Senate OKs $165 Billion to Fund Wars into '09 + Platts Study Finds Underinvestment in Oil Field Development

[Yoshie Furuhashi]

If the Americans were smarter, they would be demanding that the USG
withdraw troops from Iraq and Afghanistan (which the Iranians, the
Syrians, the Turks, the Pakistanis, the Indians, the Russians, and
other interested parties in the region can collaboratively manage on
behalf of the world) and invest the money saved ($165 billion) into
oil field development to cover the estimated investment shortfall ($95
billion).  Technology for raising oil production exists -- what's
lacking is the political will to transfer it, as well as money, to
into the right hands. -- Yoshie

<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/22/MNGF10R490.DTL&type=politics>
Senate OKs $165 billion to fund wars into '09

Zachary Coile, Chronicle Washington Bureau

Friday, May 23, 2008

(05-23) 04:00 PDT Washington --

The Senate approved a $165 billion war funding bill Thursday - enough
to pay for operations six months into the next president's term - that
includes a measure to offer veterans free college tuition and that is
stirring up controversy in the presidential race.

Twenty-five Senate Republicans defected to back a Democratic plan that
provides the free tuition and also extends unemployment benefits for
the general public for 13 weeks. Bush has threatened to veto the $47
billion extra in domestic spending, but the Senate's 75-22 vote
suggests there are enough votes to override his veto.

The Senate's vote for the war funding, which infuriated anti-war
activists, is an acknowledgement by Democrats that they won't change
policy in Iraq until a new president is elected. The House plans to
take up the package after the weeklong Memorial Day recess.

The debate had consequences for the presidential race, as the two
Democratic candidates appeared on the Senate floor Thursday to speak
in favor of the new benefit for veterans - a measure the presumptive
GOP nominee, Sen. John McCain of Arizona, opposes.

New York Sen. Hillary Rodham Clinton said the country should honor its
soldiers' service by paying their full tuition at a public university
when they return home. "This is not a half-measure or an empty
gesture," she said. "This is a full and fair benefit to serve the men
and women who serve us."

Illinois Sen. Barack Obama took an even sharper approach, criticizing
McCain for opposing the bill, which is sponsored by Sen. Jim Webb,
D-Va., a former Marine.

"I respect Sen. John McCain's service to our country ... but I can't
understand why he would line up behind the president in opposition to
this GI bill," Obama said. "I can't believe he believes it is too
generous to our veterans. I could not disagree with him and the
president more on this issue. There are many issues that lend
themselves to partisan posturing, but giving our veterans the chance
to go to college should not be one of them."

McCain missed the vote because he was campaigning in Northern
California, but he fired back with a blistering statement accusing
Obama of "taking cheap shots" on an issue "he has less than zero
understanding of."

"I will not accept from Sen. Obama, who did not feel it was his
responsibility to serve our country in uniform, any lectures on my
regard for those who did," McCain said.

McCain said he opposed the measure because of his concern, echoed by
Pentagon officials, that it could hurt retention by encouraging many
active-duty soldiers to leave the military for college. He is
sponsoring a separate - albeit less generous - proposal with a sliding
scale that would increase the benefits based on the length of a
soldier's service.

The current GI Bill benefits offer veterans up to $1,100 a month for
college, but veterans groups say they have not kept pace with tuition
costs. Webb's bill would increase the stipend to pay full tuition at
any state university - an average of about $1,700 a month. The bill
also would waive $1,200 in enrollment fees and offer $1,000 a month
for books and supplies.

The measure McCain endorsed would increase the monthly stipend to
$1,500 a month, but offer $2,000 a month for those who stayed in the
miliary for 12 years. It also would allow veterans to transfer half of
their benefits to their child if they served for six years, and all of
the benefit if they served 12 years.

The issue could put McCain and Bush in a tough spot. Veterans groups
have lobbied hard for it, and some of the GOP's most respected
lawmakers on military issues are pushing it, including Sens. John
Warner of Virginia and Chuck Hagel of Nebraska. Another clear sign:
Every Senate Republican who is considered vulnerable this November
voted for the package that included Webb's benefit bill.

But the votes Thursday also underscored the Democrats' failure to
shift Iraq policy. The Senate voted 63-34 to defeat a measure that
would have required U.S. forces to begin withdrawing from Iraq. Then
the Senate, on a 70-26 vote, approved the $165 billion to pay for the
wars in Iraq and Afghanistan through June 2009.

The vote allowed many Democrats, including both California senators,
to register their opposition to the war by voting against the funding.
But both the domestic and war spending will be wrapped into one
package and sent to Bush to sign or veto.

Sen. Dianne Feinstein, D-Calif., voted against a war-spending bill for
the first time Thursday. In an interview, she said this bill, which
would pay for the two wars for another 13 months, went too far.

"To me, that meant business as usual," she said. "I think we have to
begin to use the power of the purse (to end the war) - that is the
bottom line. If it were a small supplemental, I might have voted for
it, but this is a huge supplemental, the largest ever. I simply
couldn't vote for it."

House Speaker Nancy Pelosi, D-San Francisco, said the House is likely
to take up the bill when Congress reconvenes the first week of June.

E-mail Zachary Coile at zcoile at sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/05/23/MNGF10R490.DTL

This article appeared on page A - 6 of the San Francisco Chronicle

<http://www.energyasia.com/content/view/13482/27/>
MARKETS: Platts study finds growing supply shortage, underinvestment
in field development
Tuesday, 23 October 2007

(EnergyAsia, October 23, Tuesday) --- Energy media Platts foresees
growing oil supply shortage for the rest of the decade as companies
under-invest in field development around the world.

Platts chief economist Larry Chorn revealed this finding in a study
based on an analysis world oil field development activities during
2005. Major oil fields require a minimum of three years of engineering
and construction and often an additional year or more to reach peak
production rates after start-up.

"The fact that the industry fell behind in 2005 investment, the most
recent year that complete data is available, means there will likely
be a continued tight supply demand balance in and beyond 2010, in
spite of a 70% investment increase in 2005 over 2000," he said.

The Platts study shows that the shortfall in 2005 could lead to a
800,000-barrel-per-day reduction in anticipated spare capacity within
three years, if the International Energy Agency (IEA) demand forecast
is correct.

This shortfall could grow to 4 million b/d in 2011 as existing fields
continue to decline and demand rises. Anticipating a demand of 90
million barrels per day in 2010, the industry needed to invest $435
billion in development drilling and production facilities ($350
billion) and refining capacity ($85 billion) back in 2005, said Mr
Chorn.

But, according to recently released IEA estimates, the industry
(including national oil companies) were only able to commit $340
billion with $225 billion directed to field development.

The investment shortfall is indicative of several forces at work.
Analysts have long expressed concern that producing countries are
closing off resource access to multi-national companies, thereby
slowing development.

Further, a limited supply of experienced engineers and geoscientists
means fewer and fewer large projects can be staffed in a timely
manner.

"Spare capacity in 2006 was approximately three percent or 2.5 million
b/d. The scarcity of spare capacity makes crude oil inventory
management all the more important to the refining industry and the
markets. Spot prices are clearly impacted today by unexpected
drawdowns reflected in the EIA crude inventory weekly reports. One
peripheral consequence of the analysis is that we should expect
inventory markers' influence on spot and month-ahead prices will
grow," said Mr Chorn.

Platts, a division of The McGraw-Hill Companies , is a leading global
provider of energy and commodities information.

<http://www.nytimes.com/2007/03/05/business/05oil1.html>
March 5, 2007
Oil Innovations Pump New Life Into Old Wells
By JAD MOUAWAD

Correction Appended

BAKERSFIELD, Calif. — The Kern River oil field, discovered in 1899,
was revived when Chevron engineers here started injecting
high-pressured steam to pump out more oil. The field, whose production
had slumped to 10,000 barrels a day in the 1960s, now has a daily
output of 85,000 barrels.

In Indonesia, Chevron has applied the same technology to the giant
Duri oil field, discovered in 1941, boosting production there to more
than 200,000 barrels a day, up from 65,000 barrels in the mid-1980s.

And in Texas, Exxon Mobil expects to double the amount of oil it
extracts from its Means field, which dates back to the 1930s. Exxon,
like Chevron, will use three-dimensional imaging of the underground
field and the injection of a gas — in this case, carbon dioxide — to
flush out the oil.

Within the last decade, technology advances have made it possible to
unlock more oil from old fields, and, at the same time, higher oil
prices have made it economical for companies to go after reserves that
are harder to reach. With plenty of oil still left in familiar
locations, forecasts that the world's reserves are drying out have
given way to predictions that more oil can be found than ever before.

In a wide-ranging study published in 2000, the U.S. Geological Survey
estimated that ultimately recoverable resources of conventional oil
totaled about 3.3 trillion barrels, of which a third has already been
produced. More recently, Cambridge Energy Research Associates, an
energy consultant, estimated that the total base of recoverable oil
was 4.8 trillion barrels. That higher estimate — which Cambridge
Energy says is likely to grow — reflects how new technology can tap
into more resources.

"It's the fifth time to my count that we've gone through a period when
it seemed the end of oil was near and people were talking about the
exhaustion of resources," said Daniel Yergin, the chairman of
Cambridge Energy and author of a Pulitzer Prize-winning history of
oil, who cited similar concerns in the 1880s, after both world wars
and in the 1970s. "Back then we were going to fly off the oil
mountain. Instead we had a boom and oil went to $10 instead of $100."

There is still a minority view, held largely by a small band of
retired petroleum geologists and some members of Congress, that oil
production has peaked, but the theory has been fading. Equally
contentious for the oil companies is the growing voice of
environmentalists, who do not think that pumping and consuming an
ever-increasing amount of fossil fuel is in any way desirable.

Increased projections for how much oil is extractable may become a
political topic on many different fronts and in unpredictable ways. By
reassuring the public that supplies will meet future demands, oil
companies may also find legislators more reluctant to consider opening
Alaska and other areas to new exploration.
Video
More Video »

On a global level, the Organization of the Petroleum Exporting
Countries, which has coalesced around a price of $50 a barrel for oil,
will likely see its clout reinforced in coming years. The 12-country
cartel, which added Angola as its newest member this year, is poised
to control more than 50 percent of the oil market in coming years, up
from 35 percent today, as Western oil production declines.

Oil companies say they can provide enough supplies — which might
eventually lead to lower oil and gasoline prices — but that they see
few alternatives to fossil fuels. Inevitably, this means that global
carbon emissions used in the transportation sector will continue to
increase, and so will their contribution to global warming.

The oil industry is well known for seeking out new sources of fossil
fuel in far-flung places, from the icy plains of Siberia to the deep
waters off West Africa. But now the quest for new discoveries is
taking place alongside a much less exotic search that is crucial to
the world's energy supplies. Oil companies are returning to old or
mature fields partly because there are few virgin places left to
explore, and, of those, few are open to investors.

At Bakersfield, for example, Chevron is using steam-flooding
technology and computerized three-dimensional models to boost the
output of the field's heavy oil reserves. Even after a century of
production, engineers say there is plenty of oil left to be pumped
from Kern River.

"We're still finding new opportunities here," said Steve Garrett, a
geophysicist with Chevron. "It's not over until you abandon the last
well, and even then it's not over."

Some forecasters, studying data on how much oil is used each year and
how much is still believed to be in the ground, have argued that at
some point by 2010, global oil production will peak — if it has not
already — and begin to fall. That drop would usher in an uncertain era
of shortages, price spikes and economic decline.

"I am very, very seriously worried about the future we are facing,"
said Kjell Aleklett, the president of the Association for the Study of
Peak Oil and Gas. "It is clear that oil is in limited supplies."

Many oil executives say that these so-called peak-oil theorists fail
to take into account the way that sophisticated technology, combined
with higher prices that make searches for new oil more affordable, are
opening up opportunities to develop supplies. As the industry improves
its ability to draw new life from old wells and expands its forays
into ever-deeper corners of the globe, it is providing a strong
rebuttal in the long-running debate over when the world might run out
of oil.

Typically, oil companies can only produce one barrel for every three
they find. Two usually are left behind, either because they are too
hard to pump out or because it would be too expensive to do so. Going
after these neglected resources, energy experts say, represents a
tremendous opportunity.

"Ironically, most of the oil we will discover is from oil we've
already found," said Lawrence Goldstein, an energy analyst at the
Energy Policy Research Foundation, an industry-funded group. "What has
been missing is the technology and the threshold price that will lead
to a revolution in lifting that oil."

Nansen G. Saleri, the head of reservoir management at the state-owned
Saudi Aramco, said that new seismic tools giving geologists a better
view of oil fields, real-time imaging software and the ability to
drill horizontal wells could boost global reserves.

Mr. Saleri said that Saudi Arabia's total reserves were almost three
times higher that the kingdom's officially published figure of 260
billion barrels, or about a quarter of the world's proven total.

He estimated the kingdom's resources at 716 billion barrels, including
oil that has already been produced as well as more uncertain reserves.
And thanks to more sophisticated technology, Mr. Saleri said he
"wouldn't be surprised" if ultimate reserves in Saudi Arabia
eventually reached 1 trillion barrels.

Even if the Saudi estimates are impossible to verify, they underline
the fact that oil companies are constantly looking for new ways to
unlock more oil from the ground.

At the Kern River field just outside of Bakersfield, millions of
gallons of steam are injected into the field to melt the oil, which
has the unusually dense consistency of very thick molasses. The
steamed liquid is then drained through underground reservoirs and
pumped out by about 8,500 production wells scattered around the field,
which covers 20 square miles.

Initially, engineers expected to recover only 10 percent of the
field's oil. Now, thanks to decades of trial and error, Chevron
believes it will be able to recover up to 80 percent of the oil from
the field, more than twice the industry's average recovery rate, which
is typically around 35 percent. Each well produces about 10 barrels a
day at a cost of $16 each. That compares with production costs of only
$1 or $2 a barrel in the Persian Gulf, home to the world's lowest-cost
producers.

Chevron hopes to use the knowledge it has obtained from this vast
open-air, and underground, laboratory and apply it to similar heavy
oil fields around the world. It is also planning a large pilot program
to test the technology in an area between Saudi Arabia and Kuwait, for
example.

Oil companies have been perfecting so-called secondary and tertiary
recovery methods — injecting all sorts of exotic gases and liquids
into oil fields, including water and soap, natural gas, carbon dioxide
and even hydrogen sulfide, a foul-smelling and poisonous gas.

Since the dawn of the Petroleum Age more than a century ago, the world
has consumed more than 1 trillion barrels of oil. Most of that was of
the light, liquid kind that was easy to find, easy to pump and easy to
refine. But as these light sources are depleted, a growing share of
the world's oil reserves are made out of heavier oil.

Analysts estimate there are about 1 trillion barrels of heavy oil, tar
sands, and shale-oil deposits in places like Canada, Venezuela and the
United States that can be turned into liquid fuel by enhanced recovery
methods like steam-flooding.

"This is an industry that moves in cycles, and right now, enormous
amounts of innovation, technology and investments are being
unleashed," said Mr. Yergin, the author and energy consultant.

After years of underinvestment, oil companies are now in a global race
to increase supplies to catch the growth of consumption. The world
consumed about 31 billion barrels of oil last year. Because of
population and economic growth, especially in Asian and developing
countries, oil demand is forecast to rise 40 percent by 2030 to 43
billion barrels, according to the Energy Information Administration.

Back in California, the Kern River field itself seems little changed
from what it must have looked like 100 years ago. The same dusty hills
are now littered with a forest of wells, with gleaming pipes running
along dusty roads. Seismic technology and satellites are now used to
monitor operations while sensors inside the wells record slight
changes in temperature or pressure. Each year, the company drills some
850 new wells there.

Amazingly, there are very few workers in the field. Engineers in
air-conditioned control rooms can get an accurate picture of the
field's underground reservoir and pinpoint with accuracy the areas
they want to explore. None of that technology was available just a
decade ago.

"Yes, there are finite resources in the ground, but you never get to
that point," Jeff Hatlen, an engineer with Chevron, said on a recent
tour of the field.

In 1978, when he started his career here, operators believed the field
would be abandoned within 15 years. "That's why peak oil is a moving
target," Mr. Hatlen said. "Oil is always a function of price and
technology."

Correction: March 6, 2007

A front-page article yesterday about technology advances that made it
possible to unlock more oil from old fields misstated Saudi Arabia's
total reserves, which are about a quarter of the world's proven total.
It is 260 billion barrels, not million.

"Reports of Oil's Demise Are Greatly Exaggerated":
<http://www.nytimes.com/imagepages/2007/03/05/business/20070305_OIL_GRAPHIC.html>
"Scratching the Surface":
<http://graphics8.nytimes.com/images/2007/03/05/business/0305-nat-OIL2.jpg>
-- 
Yoshie
<http://montages.blogspot.com/>