What happens when you mix a cocktail of scandal, professional ambition, raw emotion, bungled public relations, and the dual scents of oil and money? In Brazil, you get 17 oil executives and rig hands from American companies under threat of decades of imprisonment.
In Rio de Janeiro, a federal prosecutor yesterday indicted the men -- from Chevron and the oil services company Transocean -- for their involvement in a small November oil spill off the Brazilian coast. This is showmanship -- Chevron will probably have to pay a large fine, but these men are unlikely actually to sit in prison. Similarly, notwithstanding suggestions to the contrary by Chevron CEO John Watson, the company will take its lumps and continue working in Brazil, if it is permitted to, and most probably anywhere else it can obtain access to billion-barrel oilfields.
Yet the set of events highlights both a new world in which "any small spill is a big spill," as an oilman told me yesterday, and why the flurry of announcements of fresh discoveries around the world are only the beginning. After the find comes local politics, whether it is Russia, Mozambique or the United States.
Luiza Castro AFP/Getty Image
Iraq -- drilling in a (former) war zone: With the U.S. military role in Iraq officially over, so vanishes the main official outside protection afforded Big Oil, which is working there in droves. Iraq is the largest potential new oil bonanza on the planet -- it has the second-largest known reserves next to Saudi Arabia. For oilmen, this is a bracing new day: One can hire an army of former commandoes as security -- which the companies do -- but the presence of a friendly Western security force is a qualitatively different and assuring thing. Bombings are a regular occurrence; as the Wall Street Journal's Hassan Hafidh reports, BP temporarily stopped producing oil in part of southern Iraq's Rumaila field after someone bombed pipelines.
Yet business goes on: Big Oil's stomach for badlands rises in proportion with the potential output, and in the case of Iraq's three big southern fields -- West Qurna and Zubair (pictured above), in addition to Rumaila -- the companies have pledged to produce 6.8 million barrels a day. That is a massive goal, considering that the same companies -- BP, Italy's Eni and ExxonMobil -- plan to produce just one-sixth of that daily volume from fields of similar collective size on the Caspian Sea. The Iraqi government has a stake in ensuring the companies' relative safety as its ambitions are even greater -- it hopes to raise the country's production to 12 million barrels a day by 2017. Virtually everyone outside the country regards the higher aim as fantasy. One reason is that, quite apart from the security situation, Iraqi bureaucrats make it hard for the companies to operate, reports Bloomberg. "The red tape companies encounter in Iraq -- when they apply for employee visas, for example, or try to import equipment or seek payment -- seems to reflect attitudes rooted in the past," the agency writes.
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A question of power in Saudi Arabia: The al-Saud family of Riyadh has two principal tasks -- securing its rule, and guaranteeing the smooth, long-term flow of oil income. When these dual objectives come in conflict -- such as they have in the Arab Spring -- the former takes precedence. So it is that, with King Abdullah having allocated a whopping $129 billion in social spending over five years in order to pre-empt restiveness within his population, he has cancelled plans for a $100 billion buildup of the Kingdom's oil production capacity. Saudi Arabia can currently produce about 12.5 million barrels of oil a day, and it had plans to increase capacity to 15 million barrels a day by 2020. In the Financial Times, Aramco CEO Khalid al-Falih said the expansion is no longer necessary because of increased supplies announced elsewhere. The new Saudi plans could exacerbate a projected significant tightening of global supplies in the coming years. But Barclays Capital's Amrita Sen, quoted in the FT, suggested that the rationale is the family's core agenda: "The current focus of Saudi is on domestic social spending on the back of [the] Arab Spring."
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How do you spell risk? (Hint: start with the letters b and p): Former senior executives of BP are the gift that keeps giving. That is, in terms of insight into what's behind the long, downward spiral of a company that until recently was one of the most valuable on the planet. Just two weeks ago, former BP CEO Tony Hayward surfaced with a highly risky oil-patch acquisition in Kurdistan, the oil-rich northern region of Iraq whose right to sign such deals has been challenged by the national government in Baghdad. This week the news is from the United Kingdom, where a company backed by John Browne (Hayward's predecessor in the BP CEO shot) announced an enormous discovery of shale gas near England's seaside resort of Blackpool. Matthew Hulbert, of the Clingendael International Energy Program, told me that the prospect of new jobs will ultimately bring public support of the drilling, yet as of now protests have broken out in an effort to halt the operation, which uses hydraulic fracturing, or fracking, over concerns that it could contaminate local drinking water. Whatever happens, Hayward and Browne help us understand how it is that BP has repeatedly found itself in trouble in recent years (for example by letting safety problems linger at its Texas City refinery; cutting corners in a problematic Gulf of Mexico oilfield called Macondo; and flagrantly violating a covenant with its crucially important Russian partners): A bugger-the-risks, full-speed-ahead attitude may be bred into the DNA of BP's senior executives. The question is how far down in the ranks one finds this trait.
Murder in Kabul: The last time I saw Ibrahim Haqqani -- brother of the Saudi-backed Afghan militia leader Jalaluddin Haqqani -- it was 1991, and he was concealed under a bridge outside the eastern Afghan city of Gardez. Haqqani was leading a futile rebel assault against the superior forces of then-President Najibullah, and to reach the underpass, we had to dodge targeted artillery. It was a frightening dash, and Haqqani seemed no less rattled than we; a few weeks later, he and his men finally abandoned the effort to capture Gardez. Flash forward a decade, Associated Press correspondent Kathy Gannon reports that Haqqani has met with U.S. officials working to find a settlement with his brother Jalaluddin, who since a few years after that encounter under the bridge has been a leading Taliban general.
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.