Last month, the Financial Times reported that Goldman Sachs-backed Cobalt International Energy had provided equity stakes to three senior Angolan officials in a position to help it obtain rights to drill a world-class offshore oilfield. Houston-based Cobalt went on three months ago to declare a discovery in a well called Cameia-1. Now, U.S. authorities are investigating the Houston-based company.

Angola has received much attention on the issue of payoffs in recent months. Global Witness, the U.K.-based investigative firm, has issued a report about $550 million in "social payments" provided to the state-owned oil company Sonangal by Cobalt, BP and a private Angolan-Hong Kong joint venture.

But this is just the way the oil business works on the frontier, as I write today at The New Republic. In December 2010, for example, Halliburton paid $35 million to Nigeria to settle a bribery case involving a big liquefied natural gas project that had drawn in former Vice President Dick Cheney. And not just the oil business - what makes the subject topical right now is a New York Times allegation of extensive bribery by Wal-Mart in Mexico.

I started looking at the phenomenon while based on the Caspian Sea in the 1990s. At the time, oil executives' faces would go uncomfortably pale when you mentioned a certain known go-between for bribes to senior Azerbaijan officials. In Kazakhstan, feet would shuffle and voices get rattled at the mention of James Giffen, the New York lawyer who later was charged with serving as a conduit of foreign oil payoffs to President Nursultan Nazarbayev. Two years ago, Giffen was acquitted in federal court in New York -- he did not contest the facts of the bribery accusations, but said he was innocent because the whole time he was serving his homeland, slipping inside dope to American intelligence agencies.

Things have changed. I talked to Joseph Covington, a Washington lawyer who in the 1980s headed the foreign bribery section at the U.S. Justice Department. He suggested that, unlike just a few years ago, American businessmen are no longer terrified of the Foreign Corrupt Practices Act, which outlaws bribery of foreign officials to obtain business. In the Caspian days, businessmen would fess up to bribery and pay for an extensive internal clean-up to avoid prosecution. That still is usually the case, but after Giffen showed that with the money and the gumption one can beat the FCPA, we are seeing more cases of executives electing to fight.

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Last year, the U.S. Embassy in Beijing caused a sensation when word spread that it was publicly reporting the air quality in Beijing. Chinese micro-bloggers cited an hourly Embassy tweet that often sharply diverged from official government monitoring. Official Beijing city reports generally showed healthful air in the capital; the Embassy meanwhile sometimes called the Beijing air “crazy bad.” After much criticism, the city vowed to use the same evaluation method as the embassy, reflecting the presence of especially dangerous particulates in the air.

Now, U.S. diplomats are at it again. On Saturday, the U.S. consulate in Shanghai launched a separate hourly Twitter feed of the air there. James Areddy of the Wall Street Journal notes that the initial readings were not reassuring: “Unhealthy, unhealthy, unhealthy.” The official Shanghai government reading -- good air.

The griping has already begun. The Shanghai Daily quotes Shu Jiong, an environmental professor at East China Normal University, who “questioned whether it was proper for the Consulate to use the U.S. standard to evaluate Shanghai's air quality.” Shu told the paper’s reporter: "The two countries have different demographic situations and are at different steps of development, so it will be more suitable to use the Chinese standard to evaluate the air quality in Shanghai."

This is no mere sniping. Pollution has been behind a surge in public discontent over the last couple of years, which is an unacceptable red line for Chinese authorities, who fear social instability and the threat it could pose to their political power. It is a principal reason why China is set on curbing coal consumption, and introducing green technologies into the economy.

The timing of the rollout of the Shanghai feed is likely to be met with greater than usual suspicion from some Chinese authorities. Already, this is an exceptional year for Chinese political turbulence, much of it linked to the U.S.

The Chinese Communist Party continues to be roiled by the fall of Bo Xilai, a senior regional Chinese official whose police chief triggered the trouble by disclosing a sensational murder plot to U.S. diplomats; reports this week are of another political victim -- Politburo member Zhou Yongkang, ousted as the head of the internal security system, reports the Financial Times.

There is also the awkward matter of Chen Guangcheng, a dissident who, after being taken in by the U.S. Embassy in Beijing, is seeking to leave along with this family to the United States. Beijing also partly blames the U.S. for rising friction with its neighbors over rights to the South and East China seas.

A possible saving diplomatic grace: The Shanghai readings are nowhere near as bad as those from Beijing.

In New Paltz, N.Y., 80 miles north of Manhattan, Richard Parisio laments the disturbance of the "sweet pure song of the white-throated sparrow." The culprit? Hydraulic fracturing, Parisio writes in the New Paltz Times -- "noise, night and day, from droning compressors, clanging drilling rigs, roaring gas flares."

Parisio worries that not just sparrows, nor their human appreciators, will be left the lesser for this state of affairs. There are the hermit and wood thrush, who could be "driven from their breeding grounds, unable to hear each other's songs, so crucial to courtship and the establishment of territory." And what about the bats? Will they manage to "find their food by echolocation amid all the background noise"? Parisio fears the answer may be no, which could trigger unknowable consequences such as a rise in the population of mosquitoes when their bat predators are fewer.

The new age of energy is making our lives less tranquil. Writer Robert Bryce has discussed the whoop-whooping of wind turbines, the "headaches, ear pain, nausea, blurred vision, anxiety, memory loss, and an overall unsettledness" suffered by those who live near them, not to mention the "fatigue, apathy, and depression, pressure in the ears, loss of concentration [and] drowsiness." This is a global phenomenon, says Bryce over at the National Review, a malady in "Missouri, Oregon, New York, Minnesota, Wisconsin, Britain, Australia, Canada, Taiwan, and New Zealand."

One can shake one's fist at windmills (pictured above, Copenhagen), but business is generally a cacophonous thing. Going back as far as one would like, merchants have probably always barked out the virtues of their wares, and some economic activities have been noisier than others. As we know, for instance, the racket of horse-drawn wagons in 18^th and 19^th century London was so ear-splitting that one simply could not speak audibly on the street.

Alas, the horses are gone, but the din remains. Across the globe, we are subject to disrespect of tender ears. At the Economist, there is gnashing over the defiant rustling of papers and cell-calling in the quiet cars of commuter trains across the Commonwealth, from Great Britain to Australia. Even in the joyfully raucous bazaars of Istanbul, there is a feeling that the shouting of merchants may have gone too far, reports the Wall Street Journal.

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Apart from the entertainment value, what is the big deal about the saga of Aubrey McClendon, the CEO of Chesapeake Energy, and his use of the company as a piggy bank? The big deal is that, more than any single individual apart from the innovator George Mitchell, McClendon is responsible for the shale gas boom that is shaking up geopolitics. Of course, McClendon's hijinx do not change the geopolitical shakeup, but they are a window into the type of personalities who make up the wildcat boom (pictured above, McClendon, left, owns the Oklahoma City Thunder professional basketball team along with Clayton Bennett, right). As with most such revelations, the kernels and sometimes the whole kit-and-kaboodle are detailed in the fine print of a company's annual 10-K filing with the Securities and Exchange Commission. The thing is, few people bother to read such material -- apart that is from the folks over at footnoted.org, whose whole business is to do so. The footnoted folks have been talking about McClendon for awhile now (such as here, here and -- from today's Website -- here). I asked footnoted's Theo Francis for some insight into Chesapeake. His reply follows.

O&G: What could and should a Chesapeake investor, given an ordinary read of the company's 10-K annual reports, have known about Aubrey McClendon's compensation package, perks and financial dealings in recent years? As a followup, if that same investor elected to dig deeper and follow the trail of citations, what would he or she have been able to know?

Theo Francis: Piecing it together can take some work and patience, but it's there, mostly in the annual proxy filing, with updates scattered across other filings over the course of a year.

A snapshot of McClendon's compensation in 2011 (primarily from an April 30 amendment to the company's 10-K filing) illustrates what's available: Salary of $975,000; a $1.95 million discretionary bonus -- meaning it isn't based on any kind of performance measures, but just on the board's general sense of how well he's done; $13.6 million in stock awards; and $1.3 million in perks and retirement-plan contributions. Those perks are telling too: $500,000 in free personal trips on company aircraft (on top of another $650,000 in jet rides for which he reimbursed the company), $250,000 in personal accounting services provided by company employees (about which more in a moment), and $121,570 in personal security benefits. Total for 2011: $17.9 million. Over the last three years, McClendon's compensation has added up to more than $57 million. Plus, Chesapeake doesn't even count some perks, because there's ostensibly no incremental cost to the company, including for an unknown number of tickets to sporting events. McClendon has also built up $7.5 million in a deferred-compensation plan, a kind of IOU from the company.

Which brings us to the related-party transactions, the ones that the company did disclose: Buying McClendon's map collection for $12.1 million in 2008 (a transaction that was ultimately unwound after a lawsuit); paying the Oklahoma City Thunder basketball team, in which McClendon personally owns a 19.2% stake; $2.9 million to $4.1 million a year for more than a decade for stadium naming rights, plus another $36 million over 12 years for sponsorship and advertising costs; and $4.6 million on tickets and games in 2011-12. There's also the board's decision in 2009 to ease the stock-ownership requirement and front McClendon $75 million toward his investments in the company's drilling operations, after he had to sell pretty much all his Chesapeake shares in a margin call the year before.

And then, of course, there's the long-standing "Founder Well Participation Program," which allowed McClendon to invest alongside Chesapeake in its drilling operations, and which is what's at the heart of the current series of embarrassments for the company. The disclosure about the program in last year's proxy was 1,500 words, which sounds like a lot, and there is a fair amount of detail: How the program works (very generally), why the board does it (with extra business clichés) and so on, as well as an estimate of the present value of McClendon's interests in the wells ($308 million at the time) and a table showing annual revenues, capital and operating expenditures, along with cash-flow from the program for McClendon. But there was an awful lot that wasn't disclosed. Since the original Reuters report, the news of an informal SEC inquiry, the company's decision to wind down the well participation program, and so on, the company has produced a lot more information about the program, McClendon's borrowing and other details, in a series of filings and statements.

The bottom line, I think, for any reasonable outside observer -- and I'm talking about before the Reuters bombshell  -- is that Chesapeake feels like a company run by McClendon, for McClendon and his buddies. As long as the company delivered for shareholders, there was a good chance that things could proceed with only minimal reforms for quite a while. But there's very little sense here that these people ever stopped and thought, ‘You know what, we're playing with other people's money; maybe we should rein it in a little.'

And as we've seen time and again over the years, that certainly sets the stage for a revelation like the one we got from Reuters.

Same framework -- what went undisclosed that we've learned about in recent weeks?

Quite a bit, and that's why you've seen shareholders react so badly.

For me, Chesapeake had the feel of an insouciant bad boy: It seemed like it was being pretty brash and up-front about its extremes, and that shareholders were for the most part shrugging it off. We always worry about what's not disclosed, and on one level, when a company flouts conventions to the degree that Chesapeake has, you have more to worry about (with Enron being perhaps the ultimate modern-day example). But after a while, it's easy to think, ‘OK, look, they almost got away with the map thing, and although they had to unwind the sale, there wasn't too much of a fall-out; if I were they, I'd just lay it all out and shrug when the good-governance types whine.' Maybe that's what they're doing -- you don't want to count on it, but heck, I don't own the stock, so I can let it lie.

Instead, the new revelations suggest there was, and is, a lot more lurking below the surface. There's a single line in last year's proxy that suggests McClendon might be borrowing under the Founder Well Participation Program, saying the program "does not restrict sales, other dispositions or financing transactions" involving his interests in it. What's missing is any indication that he might have more than $1 billion in borrowing backing the program, that his lenders might also do business with Chesapeake (putting him in a potentially awkward situation, to say the least), or that -- as the original Reuters article suggests -- his personal loans might require him to take certain actions that put him in conflict with Chesapeake's shareholders. That's a lot.

Now there's a suggestion, in an article by The Wall Street Journal's excellent Russell Gold, that Chesapeake may not have fully disclosed some $1.4 billion in off-balance-sheet arrangements of its own. That would seriously ratchet up the disclosure failures, in my view.

Go to the Jump for more of Theo Francis and the rest of the Wrap.

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The geopolitics of bananas, China and over-heated rhetoric: Are oil rigs a strategic weapon? The answer is apparently yes if you are China, which has joined Russia in the league of large nations carrying big petro-spears. The South and East China seas have long been a source of friction between China and its neighbors for reasons of Beijing's naval aspirations, the promise of oil and gas riches underlying the waters, plus the occasional kerfuffle over fish. For a month, China and the Philippines have been in a standoff over a fishing ground called Scarborough Shoal. But now the gloves are off. China has begun to block imports of Philippine bananas, and to suspend tourism in the Philippines. On Monday, an anchor on China's state-run CCTV went so far as to say -- twice -- that the Philippines is in fact a Chinese territorial possession, reports Time's Hannah Beech. Two days later, we heard from Wang Yilin, chairman of the state-owned oil company Cnooc, speaking on the usually staid occasion of the launch of new oil drilling, in this case in the South China Sea off the coast of Hong Kong. "Large deep-water drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country's offshore oil industry," Wang said, according to the state news agency Xinhua. Erica Downs, the China oil watcher at the Brookings Institution, told the Wall Street Journal's China Real Time blog that she suspects that Wang is addressing either domestic political or financial audiences -- seeking favor or more financial support. Look for more such tantrums given the numerous political flaps going on simultaneously in China, along with the scheduled turnover of national leaders.

Abundant oil, and the hope of serendipity: Is the problem with the oil abundance narrative -- the talk that the U.S. is on the cusp of energy independence -- that it relies too heavily on everything going right? Perhaps. Frank Verrastro -- who runs the energy program at the Center for Security and International Studies, and was formerly with Pennzoil, and before that in numerous federal government positions -- thinks that a multitude (and probably too many) stars need to line up for the abundance folks to have their way. There is much oil below ground to be sure, specifically in the shale oil of North Dakota and Texas. The hangups come in extracting it -- little matters such as the cost of production, the impact on water, and the price at which the oil can be sold. "If you are just doing energy resource development balls to the wall, then can you do this because the resource is there? Absolutely," says Verrastro -- as long as you ignore project economics, financing, government regulation, environmental concerns, required infrastructure and rates of return. John Hofmeister, the former president of Shell USA and author of Why We Hate the Oil Companies, also thinks the U.S. oil abundance narrative is optimistic. As field development proceeds, oil production will level off at some point, and not grow as far as the eye can see, Hofmeister told me. Shale oil and gas development will have to slow as it gets closer to population centers, he said. Says Verrastro: "[The forecasts are] way premature. We are in chapter 1, page 10, and some people have us at 18 million barrels by 2020."

For the Sudanese, first it was oil and now it is survival: Sudan broke into two nations last July, and since then has spent much time in virtual war with itself. Apart from the usual ethnic and religious rationale, there are economic reasons: Both states -- Sudan and South Sudan -- are in deep trouble.  Before the breakup, Sudan got about 90 percent of its revenue from oil exports. In the first quarter of 2011, the country had a trade surplus of $1.7 billion, Reuters reports; but in the same quarter this year, it has a trade deficit of $540 million. Against these data, opposition leader Hassan al-Turabi is forecasting doom for the regime of his former protégé, Sudan President Omar Hassan al-Bashir. "The economic crisis has intensified and this is very dangerous. If the hungry go out in a revolution, they will break and destroy," Turabi said in the Reuters report. " ... I expect it won't take us long now." South Sudan, which received most of the oilfields in last year's national divorce, cut off oil production in January after accusing the north of stealing shipments. So, in order to stave off collapse, it has been borrowing abroad, reports Bloomberg. South Sudan secured a $100 million line of credit from Qatar National Bank, $500 million from an unidentified benefactor, and expects money from China as well. Will reason prevail? Last year, we thought it already had.

Is Europe, wishing for energy security and crispy winters indoors, looking in the right places for its natural gas salvation from a supply grip held by Russia?

As of now, Europe continues to cast its gaze 1,700 miles to the east in Baku, and across the Caspian Sea from there to gas-rich Turkmenistan. Breaking the news gently, Azerbaijan does not have the spare 30 billion cubic meters a year that Europe is seeking -- it has about 5 billion cubic meters. As for Turkmenistan, it simply is not going to take on Russia's Vladimir Putin, who opposes any such shipments.

Iran is off the table. Until it breaks a logjam with Baghdad, Kurdistan is too. Ukraine deals expected with Chevron and Shell may result in a bit of shale gas, the Financial Times reports. ExxonMobil and Austria's OMV may add a similar volume from fields in the Black Sea.

Yet, all of this together is minuscule compared with the 20 billion cubic meters a year that Israel appears prepared to export in the form of liquefied natural gas starting in five years, as I write this week at EnergyWire. The volume is larger if you include gas discovered in adjacent Eastern Mediterranean fields in Cypriot waters, according to Houston's Noble Energy, which is doing the drilling in both countries.

This is not the scale of gas that creates petro-states. But it will provide a tidy sum for Israel and Cyprus, and much of the gas that Europe is pursuing.

The finds are part of the Levant Basin, which, according to the U.S. Geological Survey, contains 122 trillion cubic feet of natural gas and 1.7 billion barrels of oil underneath the waters of four countries -- Cyprus, Israel, Lebanon and Syria. Oil drilling is also being carried out on- and off-shore in Israel (pictured above, drilling for kerogen last year near the Israeli kibbutz of Beit Guvrin).

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If oil and gas are dirt-cheap, suddenly as abundant as hamburgers, or both, is it time to ring out the Hallelujah Chorus? Even if you are a climate change skeptic, the answer is no, according to two interesting reports this week.

A growing number of analysts and writers are joining a parade celebrating what they believe is an imminent age of U.S. self-sufficiency in the production of oil and gas. This blog has raised questions about the lack of data behind these projections, while analyzing the considerable geopolitical disruption to come should they be correct.

This week's addition to the discussion comes from Michael Levi, who watches energy for the Council on Foreign Relations, and the Energy Security Leadership Council, a group of retired U.S. senior military officers and current and retired corporate executives. Neither challenges the underlying assumption of a new era of fossil fuels, but instead take aim at those shouting kumbaya.

On his blog, Levi asserts that forecasts of a new industrial age, ignited by cheap natural gas, and of the near-elimination of U.S. vulnerability to energy-borne instability are "detached from basic economic and geopolitical reality."

Levi quotes Robin West, the head of PFC Energy, from a Washington Post piece. West said: "This is the energy equivalent of the Berlin Wall coming down. Just as the trauma of the Cold War ended in Berlin, so the trauma of the 1973 oil embargo is ending now. The geopolitical implications of this change are striking: We will no longer rely on the Middle East, or compete with such nations as China or India for resources."

In 1973, the U.S. relied on imports for 15 percent of its oil and gas, Levi notes. Boom enthusiasts say that U.S. imports will fall from the current 45 percent of consumption, to 22 percent of the total. Which makes him ponder: "If 1973 ushered in a new age of energy insecurity, it is tough to see how a fall in imports to a level still higher than the 1973 one would reverse that."

Update: After the Jump, West responds to Levi.

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Let's say you are hired to watch Aubrey McClendon, the titan of Oklahoma City. George Mitchell technically enabled the shale gas boom with his technological improvements in hydraulic fracturing. But it was uber-gambling, go-for-broke McClendon who, sweeping up millions of acres of land, putting down rigs and drilling before almost anyone else had risen from their chair, parlayed Mitchell's invention into the global, game-changing industry it is today. He single-handedly made his company, Chesapeake Energy, the king of the shale gas patch.

The thing is, McClendon (pictured above, left, with Jack Nicklaus) has a few ... ummmm ... eccentricities. Like the glutton in the sweet shop, the cash-minded McClendon cannot resist a taste of potentially profitable ventures to which he takes a hankering. He wants to run a hedge fun, for instance, not to mention a professional basketball team, a cattle ranch -- and let's have some restaurants! Every now and then, McClendon requires personal cash infusions in the tens of millions of dollars to cover bad investment bets. You are paid to patrol those gorging instincts, as described by the Wall Street Journal's Russell Gold, yet what to do when he simply goes on being ... being, well, Aubrey McClendon? He is your charge. Yet he is so ... entertaining. And successful!

Until he isn't, and don't you look flat-footed, and downright unseemly, when you shout about McClendon's excesses, and threaten his throne?

So we have the current narrative of McClendon. Three weeks ago, McClendon was broad-sided by a Reuters expose regarding his unusual contractual right to invest side by side with Chesapeake in shale gas wells, and borrow money to do so from Chesapeake partners. Today, Chesapeake's main investor, an investment firm called Southeastern Asset Management, is demanding that McClendon curb his speech, and who he meets with -- or else. By else, Southeastern means Chesapeake could be sold to the highest bidder.  Already, Southeastern is partly responsible for McClendon losing his title as chairman, leaving him solely CEO. That's not a huge deal, but given the choice, most senior executives would prefer to be both. 

But is the board, Southeastern or anyone close to the matter truly surprised by McClendon's behavior?

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