A mountain-top take on the flood: If Montana is a microcosm of the world, one message to glean is that we are not in the midst of a decades-long flood of oil supply in the United States, as many suggest. Instead, the red lights are blinking across the exuberant U.S. oil patch. As you recall, much has been made in recent months about the momentous prospects for U.S. oil and gas, which are said to be leading a global fossil fuel revolution, with meaningful implications for fortune-hunters and geopolitical players alike: North America will be independent of outside oil producers, the U.S. will experience an industrial revolution, and OPEC will drift into laggardly inconsequence. So what to think about the latest news from folks approaching the punch bowl with bad intentions?

Let's start with Montana, and the now-legendary Bakken shale oil formation. Bob Brackett, an analyst with Bernstein Research, studied a dozen years of shale oil drilling data for this mountainous state bordering Canada. What he found was a steep oil production increase through 2006 -- surpassing 100,000 barrels a day --  followed by a fast, 40 percent decline to about 60,000 barrels a day today. The plummet is counterintuitive because the time frame coincides with a capital spending binge by the industry -- tens of billions of dollars poured into the new innovations and technology that have opened up the Bakken and other shale plays. So why has Montana's production dropped? "Resource plays," Brackett writes in a note to clients today, "have limited/finite drilling locations. The best locations get drilled early, the less economic ones later, and once they are drilled, operators move on." In other words, Brackett told me in a followup email, "industry drilled the low hanging fruit first, and now can't find the same quality of opportunity."

But surely this is just Montana, right Bob? You don't mean to suggest that the entire Bakken formation, including North Dakota -- on which so many North American projections centrally rely -- is in trouble, too? Sadly, that is precisely what Brackett means. In fact, he has quantified the Bakken's production trajectory. The key number is six - that is the longevity of a Bakken well before it turns into a "stripper," industry argot for a worn-out nag producing just 10 or 15 barrels a day, from 400 barrels a day at its peak. Right now, just 200 modern Bakken wells are strippers. But in roughly six years, there will be 4,000 of them, Brackett says. "All good things in the oil patch come to an end," Brackett told me. "In the case of North Dakota, that is a long time -- years -- off, but even that too will suffer the same fate" as Montana.

Even now, the fortune hunters among us are suffering. ExxonMobil, the biggest player on the U.S. natural gas patch, made its second quarter numbers yesterday only by selling off $7.5 billion in hard assets such as its Japanese refining unit. In Pennsylvania, a court yesterday rejected the state's right to compel localities to allow oil and gas drilling. What does this tell us? That just because you pick up the scent of oil and gas, a load of other factors affect how much will actually be produced, and for how long. Says Brackett in our email exchange: "There is an emerging view of a wave of oil production (from shale and otherwise) coming.  I just want to point out the difficulties in an exuberant view."

Go to Part II of the Wrap.

The West zigs, China zags: The West is erecting tariff barriers to prevent Chinese renewable energy companies from dumping their products. What is China's reaction? To set its sights on the developing world. So far at least, this may be one of the few win-win areas in the East-West relationship.

In May, the Obama administration imposed 26 percent tariffs on Chinese-made steel towers that support wind turbines. Regulations and tariffs like these have made it challenging for Chinese wind companies to penetrate the U.S. or Europe, one result of which is that European manufacturers account for 89 percent of the installed wind capacity on the continent. That is good news for Western turbine-makers.

But it is only part of the story -- 63.5 percent of new wind capacity last year was installed outside North America and the European Union. And in these areas, Chinese manufacturers have the advantage. Chinese companies accounted for 30 percent of global wind turbine sales last year, and they hold four positions among the world's top ten turbine manufacturers (including Nos. two and three, Sinovel and Goldwind, respectively). Much of this success has come at home -- 44 percent of new capacity was in China itself last year. But Ming Yang Power Group is also partnering with India's Reliance Group to develop 2.5 gigawatts of wind energy in India. In Argentina, Chinese turbines and financing are building Latin America's largest wind-power project. And Hydro China has been assessing a wind farm project in Ethiopia. Lower costs account for China's success in frontier markets. Chinese-state financing helps Chinese companies to underbid Western rivals by 20 percent to 30 percent, report the Financial Times' Leslie Hook and Pilita Clark.

This bifurcated global market appears likely to grow, providing scope for both Western and Chinese companies to continue to compete side by side, according to Pike Research. Western companies still have the edge when it comes to integrating wind farms into electricity grid systems. Pike's Dexter Gauntlett told us: "With the switch to renewables, whole systems are going to change, and there will be a big market for Western tech and products."

Go the the Jump for the rest of the Wrap.

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ExxonMobil is only a business, yet for a century and a half it has vexed, baffled, and unsettled us. Take Hannibal Lecter, Daniel Plainview, and Darth Vader, roll them into a single sinister character, and you start to grasp the feelings of generations of critics. "We need policy change on a global scale, and Exxon has been at the forefront of those blocking change," former Vice President Al Gore wrote a week ago on his blog.

But why? There are its outsized profits, of course -- $41.1 billion last year alone -- plus the remarkably enduring heartless persona of John D. Rockefeller, its founder in the old Standard Oil days. But Gilded Age ruthlessness and success in the contemporary capitalist West do not sufficiently explain the shadow that ExxonMobil seems still to cast on our collective imagination. After all, today's Apple is bigger than ExxonMobil, and the last of the robber barons have been dead for the better part of a century.

Enter a surprising and trenchant new decipherer of our confounded anxiety: Rex Tillerson, boss of the oil giant. Since becoming CEO six years ago, Tillerson has muddled the company's traditional image with a polished and deliberate nuance that seems to project caring. He has been "cautious, genial, accommodating and eager to soften [the company's] hard edges," Steve Coll, the author of Private Empire, a new book on ExxonMobil, told me.

But two weeks ago, the mild-mannered, pin-striped executive seemed to abruptly throw caution to the wind. In a speech before the elite Council on Foreign Relations (CFR) in New York, he suggested that Americans suck it up and adapt to global warming. "We have spent our entire existence adapting, OK? So we will adapt to this," Tillerson said in reply to a question from the audience. "Changes to weather patterns that move crop production areas around -- we'll adapt to that. It's an engineering problem, and it has engineering solutions." For starters, Tillerson said, ExxonMobil had set out to educate the "illiterate" public as to the facts, and move them away from the purveyors of "manufactured fear."

At once, we are back to the Exxon we once knew.

What got into the "cautious" Tillerson is a question between him, his board, and their shareholders. But conspiracy theories are unnecessary to explain the resulting nervousness of critics: As Coll's book describes, Tillerson's predecessor as CEO, Lee Raymond, declared war on efforts to restrain CO2 emissions, spending millions of dollars of company money starting in the late 1990s to fund writers and think tanks that cast doubt on climate science. The cash went both directly from ExxonMobil's public affairs unit, and was channeled through the American Petroleum Institute, the industry's lobbying arm in Washington, D.C., Coll writes, and it managed to help roil four decades of U.S. environmental politics.

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ExxonMobil confirms that it has filed to bid on a group of Afghanistan oilfields containing an estimated 1 billion barrels of oil and gas, an instant validation of one of the riskiest resource plays on the planet. If the company's application proceeds, it could set up a battle of colossals, since the state-owned China National Petroleum Corp. and India's ONGC have also filed to bid, I have been told.

The tender deadline was yesterday to file an expression of interest. Company spokesman Alan Jeffers told me that the filing is among Exxon's global search for new hydrocarbon opportunities. The filings are to be made official after a government meeting Wednesday at which applications will be vetted.

The Exxon filing is surprising because until now the Afghan natural resource play, while rich, has been perceived as highly speculative, a place for the most daring wildcatters, in addition to regional state-owned companies such as CNPC, which won the first Afghan oil tender last year. The reason is both security -- no one knows whether a 30- 40-year project would endure since Afghanistan has been at almost constant war for more than three decades -- and the lack of infrastructure. Namely, how do you get the oil and gas to the market? Majors of the scale of Exxon rarely pursue such ventures, preferring for wildcatters to prove them out, then seek to buy in with their deep pockets.

BP and the Russian squeeze: BP may be moving toward yet another comeuppance in Russia. This chapter in the company's nine long years of Russian misery goes back to January 2011, when it announced a coup -- it was bouncing back from the devastating 2010 Gulf of Mexico oil spill, and forming a turbo-partnership with the Russian state oil company Rosneft to drill for oil and gas super-giants in the Arctic Circle. But then things went horribly wrong: BP's regular Russian oligarch partners accused the Britons of violating their rights of first-refusal for any BP deal in Russia. The oligarchs, collectively known as AAR, sued and scuttled the BP-Rosneft deal, and sought billions of dollars in alleged damages. Early this month, BP finally threw in the towel, and said it is assessing offers to buy its half of TNK-BP. Here is where the fresh trouble starts. BP has suggested that there are at least two bidders -- AAR and an unidentified state-run Russian company. Among stock analysts, the general thinking is that, whoever buys the 50 percent, BP could walk away with some $25 billion. But now it appears that that sort of payday will arrive only if AAR fails to have its way. Sadly for BP, the record supports the opposite outcome. In a note to clients on Wednesday, Citigroup's Alastair Syme said that, given the oligarchs' aggressively pursued, $13 billion lawsuit against BP, the Britons are unlikely to achieve the $25 billion figure. How much are they likely to receive? AAR (which believes that BP is bluffing about there being another suitor) is thinking more like $7 billion, right around the figure that BP paid for its share of TNK-BP in 2003 (the Financial Times' Guy Chazan first reported the $7 billion figure, which we have confirmed). In the Russians' apparent view, that would allow BP to save face by leaving with all the money it originally gambled on TNK-BP.

But that may not be the end of BP's latest shellacking. The company is thought to be seeking to leverage its exit from TNK-BP into a position on the resource-rich Arctic, similar to deals struck by ExxonMobil, Italy's ENI and Norway's Statoil, as I write at EnergyWire. But it should not expect kid-gloves treatment by the Russian government. The reason is that President Vladimir Putin and his oil lieutenant, Igor Sechin (pictured above, right and left, respectively), will have closely monitored the latest TNK-BP deal. They will see that BP can be shellacked with impunity. If indeed BP proceeds with the sale of its TNK-BP share, expect this sequence of events: BP sells out for a firesale price to AAR; AAR resells that share or more to a state-run company such as Rosneft at a markup, but less than the $25 billion market price; and BP gets a place on the Arctic, but on far more advantageous terms for the Russian side than achieved with the other western companies.

Go to the Jump for the rest of the Wrap.

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David Biello is associate editor for environment and energy at Scientific American magazine.

So far in 2012, ExxonMobil has made $104 million a day -- and that's an off year. In 2005, the oil giant earned a net profit of $36.1 billion, or "more money than any corporation had made in history," writes Steve Coll in his illuminating saga of the most successful and largest heir to John D. Rockefeller's strangling monopoly, Standard Oil. Simply put, ExxonMobil has been among the world's largest and most profitable companies since the 1950s, and it is so confident of its future that it recently raised the dividend paid to shareholders by a whopping 21 percent.

Private Empire begins in 1989 with the tale of the Exxon Valdez, the company oil tanker that ran aground in Alaska's Prince William Sound, and ends 22 years later with ExxonMobil's credit rating surpassing that of the U.S. government. The title derives from the company's need to control actual physical territory in order to profitably pump. The result is amassed power and influence, used mostly for ill (if one's interest is human rights, economic development or combating climate change), or good (if one's focus is cheap gasoline).

Coll, a two-time Pulitzer Prize-winning author of previous books on the CIA's history in Afghanistan and on the Bin Ladin family, here weaves a work around a profile of the reigns of two emperors. There is South Dakotan Lee "Iron Ass" Raymond, who parlays a relentless focus on safety in the wake of the Exxon Valdez into imperial corporate control, whether it is the initiation of a "safety minute" at the start of any meeting or the installation of tracking devices in the vehicles of known speeders. Raymond's successor, the Texan Rex Tillerson (the "Eagle Scout"), attempts to soften the company's image by doling out medals for good work, an incentive reminiscent of scout merit badges, and embracing a carbon tax to control greenhouse gas emissions.

ExxonMobil perhaps looms largest in the U.S. on this subject of climate change. Early in the book, Coll lays out the company's apparent objectives via an American Petroleum Institute memo from the 1990s:

Average citizen "understands" (recognizes) uncertainties in climate science; Recognition of uncertainties becomes part of the "conventional wisdom"; media "understands" (recognizes) uncertainties in climate science; media coverage reflects balance on climate science and recognition of the validity of viewpoints challenging current "conventional wisdom"; those promoting the Kyoto treaty on the basis of extant science appear to be out of touch with reality.

If that was also ExxonMobil's goal, the many millions of dollars that the oil company spent worked. Each item on that memo can be checked off -- thanks largely to Raymond's close relationship with then-Vice President Dick Cheney. "We just gave away the environment," observed then-Treasury Secretary Paul O'Neill after the Bush Administration repudiated action on climate change in 2001.

Similarly, just 12 days before Obama's inauguration, Tillerson publicly advocated a carbon tax. In fact, that thumbs up seemed to have more to do with further delay of any regulation than a change of heart on climate change. As Coll puts it nicely, quoting a company lobbying meeting with the new Administration, Tillerson "was happy to have a position that nobody was going to embrace."

The irony is that ExxonMobil found good use for climate change: It cut its greenhouse gas emissions as a result of its focus on profits, largely by avoiding the flaring of natural gas co-produced with oil. It even used climate predictions to inform exploration, banking on global warming to melt more ice and thus allow access to Arctic oil, a nice side benefit of the company's intransigence on climate change. "Don't believe for a second that ExxonMobil doesn't think climate change is real," Coll quotes a former manager.

Such quotations as well as anecdotes humanize the massive cast of characters in this sprawling book. Raymond is revealed as kind to the air crew of his private corporate jet while routinely excoriating journalists, analysts and underlings for alleged stupidity. Fine phrases -- "Chad's politicians and labor leaders might be poor and some of them might be unsophisticated, but they had been schooled in obduracy and provocation by French colonialists, which made them formidable" -- leaven the work. And Coll puts the reader inside very closed rooms, such as a barbecue thrown for Russian President Vladimir Putin by U.S. President George W. Bush in November of 2001.

The book reads much like Dan Yergin's magisterial The Prize, absent the zest of conquest and with just a whiff of distaste. Coll handles science -- whether climate change, endocrine disrupting chemicals or geologic estimates of natural gas reserves -- with clarity and power. There are tantalizing hints of massive technological feats, such as Sakhalin I, ExxonMobil's massive engineering project off the western coast of Russia. Yet the poetry of the vast machines that enable oil's journey from well to gas tank is foregone in favor of the endless mundanity of bureaucratic power.

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In a 2006 cover story in FP, the columnist Thomas Friedman described what he called "The First Law of Petropolitics." In it, Friedman revealed an inverse relationship between oil prices and the kindliness of petrocrats: As oil prices surge, the rulers of oil-producing countries tend to become inflated jerks; when prices are low, they are high-minded pussy cats.

Yet for all its genius, Friedman's law is limited: He was talking about pure petro-states such as Russia, Nigeria and Saudi Arabia. Isn't the behavior of freely elected leaders in developed economies influenced by any oil commandments?

I raise this question while observing President Barack Obama and oil companies act upon some other mutually understood political principle in the heat of the election-year campaign: Over the last week or so, American oil giants Chevron (see interview below) and ExxonMobil have suggested that Obama wise up and embrace America's inner-petrostate. Obama has responded by embracing his inner-cudgel, urging oil companies to accept a non-fossil fuel future, and meanwhile surrender $4 billion in tax breaks.

Oil is pivotal in the campaign platform of Obama's opponents. We see this most recently in finger-pointing over gasoline prices. But gasoline is not the operative hothouse for the top-line political battle. Instead, it is a sideshow to the central backdrop, which is the nation's high-stakes oil boom, a projected surge in the U.S. oil supply over the coming decade from shale oil, deepwater Gulf of Mexico reserves and imports from Canada's oil sands.

The opposing sides are capitalizing on high gas prices to advance competing, long-existing agendas -- Big Oil to pry open coveted basins underlying coastal and federal areas, and Obama to keep incubating still-early clean-energy technology.

Toward these aims, the oil industry's strategy is to persuade Americans that these closed-off lands are all that stand between U.S. independence from foreign oil, and continued fealty to those fellows governed by Friedman's First Law. For Obama, it is to contextualize the oil boom as big but historically ephemeral: Americans can bask in their gas-guzzling ways now, but must also begin to pave the way for the inescapable post-hydrocarbon era.

To state this as a corollary, there is a direct relationship between the vigor of an oil boom, and the temperature of high-flown political rhetoric. (Given the apparent hurt feelings afflicting both sides, one observes another active corollary -- a direct association between rising wealth and thinning skin, a sublaw that seems to straddle the oil and financial industries.)

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Natural gas is roiling global geopolitics, but the latest news -- a bad result in Europe -- is that the tsunami is still very much solely U.S.-based.

The U.S. shale gas boom has shaken up geopolitical presumptions by challenging Russia's gas-led hold on Europe, and threatening to crush far-dirtier rival fuels such as coal around the world. The thinking has been that Europe -- specifically Poland -- might be next in unleashing big, new shale gas supplies, an event that would make life even more difficult for Russia's petro-ruler, Vladimir Putin.

But ExxonMobil yesterday announced that its Polish drilling efforts (pictured above, drilling in the eastern Polish village of Grzebowilk) thus far have failed, reports Bloomberg's Joe Carroll. Exxon, the world's largest publicly owned producer of natural gas, said two exploratory wells in eastern Poland failed to produce sufficient gas to be profitable. This comes on top of a slew of bad signs about Europe's gas prospects: Over the last two years, drilling by three wildcatters -- Lane Energy, 3Legs Resources and BNK Petroleum -- produced only small volumes in northwest Poland, Bernstein Energy said in a note to clients this morning. Last year, Shell announced similar negative results in Sweden, and in 2010 Exxon declared its Hungarian shale-gas efforts a failure. On top of this, France and Bulgaria have banned hydraulic fracturing, the method used to produce shale gas.

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Season of uncertainty in Kurdistan: ExxonMobil has been red-faced since its big oil contract in Kurdistan was prematurely disclosed, subjecting the company to embarrassment in Baghdad, which forbids such back-room dealings without its permission. But that has only made the pressure for a revenue-sharing agreement between Kurdistan and Baghdad stronger. While the two sides continue to bicker, other Big Oil companies are in talks with Kurdistan. At stake in Iraq as a whole are some of the largest new volumes of oil and gas on the planet. The Financial Times' intrepid Javier Blas produces a report on a several-day trip through Kurdistan. The Kurds envision shipping 1 million barrels a day of oil, up from the current 175,000 barrels a day, Blas writes, but no company will actually spend the needed billions of dollars for field and transportation development until that Kurdistan-Baghdad accord materializes in the form of a petroleum law. He notes that the two sides have described their deal as imminent for the last five years. Meanwhile, a boomtown atmosphere has been unleashed:

Erbil, the political capital of Iraqi Kurdistan, is entering an oil boom. The city of 1 million people, which still lacks a good hospital, has seen the opening of its first luxury hotel -- and another three are under construction. Oil executives fly in and out with airlines offering new routes each month. But while money is pouring in, the region has yet to develop services to benefit from it, importing everything from equipment to food. Costs are rising fast, too. Housing prices are rocketing and salaries in the oil industry have doubled in the past five years. And with more than 40 companies elbowing for space in Erbil and the region, retaining competent staff is a problem. Local political commentators are already warning that the region -- like others in Latin America, Africa and the Middle East -- could see the blessing of oil turning into a curse.

Go to the Jump for more of the Wrap

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The governor of Alaska is saying publicly what we've known for some time -- that his state's bonanza of natural gas is best shipped to Asia. Gov. Sean Parnell is asking oil companies that control Alaska's gas equivalent of 6 billion barrels of oil -- BP, Shell ExxonMobil and ConocoPhilips -- to explore the details of shipping the largesse across the Pacific. Yet the companies continue to be slow off the mark, and may still have their eye stubbornly on the hopelessly glutted Lower 48 U.S. states, according to Rebecca Penty of the Calgary Herald.

Unlike the estimates under circulation regarding the Western Hemisphere's oil reserves, this side of the globe definitively does have an embarrassing surplus of natural gas. It's this surplus that has stranded Alaska's North Slope riches. It's not needed in the continental U.S., which is replete with both conventional and shale gas.

Much new gas is being directed to China -- from Qatar, Australia, Turkmenistan and probably from new discoveries in eastern Africa. Russia would like a deal to ship nearly the equivalent of China's entire current annual gas consumption. Yet Parnell is betting that the increased supply would not glut Asia, but trigger a demand chain reaction and further boost China's shift to gas, which seems to be a reasonable economic calculation. If that happens, it would shake up geopolitics since less coal might be burned than is projected, hence reducing expected emissions of CO2.

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Montana's governor says he's going to ride ExxonMobil "like smell on a skunk," not to mention mete out more conventional unpleasantries like going to court. In case the oil giant has any funny ideas while being subject to these measures, "There ain't nobody gonna blow smoke up the south side of this north-facing governor." Gov. Brian Schweitzer, who is a soil scientist, has been driven to this display of trash-talking by the July 1 spill of some 1,000 barrels of crude oil into the pristine Yellowstone River, about 100 miles downriver from Yellowstone National Park.

Does Exxon deserve this scale of rudeness? After all, when BP suffered this treatment last year, it had spilled 5,000 times that volume into the Gulf of Mexico. Unlike the 56 minutes it took Exxon to sever the flow of oil, BP took five days short of three months to shut off the Macondo oil well. In addition, as far as I know, nobody at Exxon has asked to get his life back, the innocently delivered but unfortunately received remark that then-BP CEO Tony Hayward will rue for the rest of his days.

The answer is yes. The main reason is that Exxon has all but danced on BP's grave since the Macondo spill. For example, back in March, BP's new CEO, Bob Dudley, delivered his first full-blown speech since the spill, sort of a coming-out address at Dan Yergin's annual oil show in Houston. Dudley's main message was that what happened to BP could happen to anyone and that all oil companies would have to change their procedures. It is "unrealistic" to dismiss Macondo as a "'black swan', a one-in-a-million occurrence that carries no wider application for our industry as a whole," Dudley said.

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