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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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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To understand why companies wish to drill off the U.S. eastern seaboard, you need only make a beeline 5,000 miles southeast -- straight to Jubilee, an oilfield off the shore of the west African nation of Ghana. Because there are an estimated 1.5 billion barrels of oil in Jubilee, the reckoning goes, there just might be oil off the coast of Virginia. The reason is ancient geology -- Africa and the Americas were once one gigantic continent, and geologists have already found analogues to Jubilee across the Atlantic in French Guinea, as I write on EnergyWire.
These similarities are interesting not just for their curiosity value, but because they are part of a stark transformation in how experts perceive global energy, and trends in geopolitical power: Less than a year ago, the conventional narrative was scarcity -- Big Oil simply could not find any more super-giant oilfields, and were left trifling with comparative puddles. Hence, the world needed to develop alternative energy, and fast. Now, barely a week goes by without a fresh discovery in Africa, and a new expert report on the new U.S. oil bonanza; we are told we have oil and gas as far as the eye can see, limited only by the skilled labor, pricing points and equipment to produce it (pictured above, pipeline awaiting installation in Cushing, Oklahoma.).
In a significant way, that is good news -- to the degree it is accurate, we are not imminently returning to the Stone Age, as a new-age movement known as the Doomers have forecast.
But it is a highly challenging development for those concerned about the Earth's warming trend: They are stripped of one of the primary underpinnings of their argument for rapid development of solar, wind and electric cars -- that oil is running out, and that the West is too reliant on supplies from nefarious nations. As it appears, much of the new oil will be produced by quite normal nations, such as Canada and the United States.
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Let's say that the new conventional wisdom is correct -- that we ought to dispense of worries of resource scarcity, and embrace a dawning age of U.S. oil abundance and self-sufficiency. If we ask ourselves what that means, one conclusion is the apparent elimination of a central rationale for the development of clean energy technologies -- that the U.S. needs them to shed its reliance on unreliable oil imports from nefarious Middle East nations.
Clean-tech must be scrutinized through a political lens, because by and large, none of the technologies stands on its own feet as yet in the marketplace. They require political support to survive. Let's take a look at the calculus for clean-tech.
Industry analysts and journalists assert almost weekly (like Citigroup's Ed Morse and reporters at the New York Times) that U.S. shale oil and deepwater reservoirs, plus Canadian oil sands, are making the U.S. virtually self-sufficient in oil. (I myself have urged caution in this exuberance.)
In response, President Barack Obama said last week that oil drilling is not the "be-all, end-all strategy" of being energy self-sufficient, but rather that the U.S. requires "all of the above," meaning solar, wind and biofuels, too. He said this because he wants to retain federal support for cleantech companies and research, but is being pummeled by opponents who call such assistance a boondoggle, and accuse him of hostility to oil. The other reason he said this is that gasoline prices in much of the country are well over $4 a gallon.
Already, politics have knocked out another pillar of the clean-energy foundation -- the push to hold down CO2 emissions. Since there is no longer apparent majority U.S. political will to stave off global warming, clean-tech has seemed to lose that logic for public support.
Now goes the argument of energy security: If the forecasts of a U.S. bonanza are accurate, biofuels, advanced batteries and other technologies will be unneeded for the purpose of energy freedom from the Middle East.
With planetary collapse and energy security eliminated from the calculus, clean-tech would be back to basics -- its sole apparent remaining case for public policy support, at least in the U.S., would be the popularity of things clean. Promoters of these technologies would either have to make that case, or become cost-competitive and survive in the marketplace.
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Mozambique is the world's newest petro-state. U.S. and Italian companies say they have found the natural gas equivalent of more than 4 billion barrels of oil offshore from the southeast African country.
The news is larger than Mozambique, as we see again that long stretches of the African continent from north to south on both coasts appear to be swimming in oil and natural gas. The geologic structures are so rich that drillers have sought and found analogues across the Atlantic in French Guiana.
Until this month, Mozambique attracted publicity for an outbreak of rhinoceros poaching (South African counter-poaching squad on the Mozambique border pictured above), but not much for oil or gas. Now Italy's Eni says it's found the gas equivalent of 2.5 billion barrels of oil in a field called Mamba (a 1-billion-barrel field is regarded as a supergiant) off of Mozambique's coast. Earlier this month, Houston-based Anadarko announced a discovery of more than the gas equivalent of 1.5 billion barrels of oil.
In a morning note to clients, Bernstein Research said the Anadarko find could be triple the announced figure, which if true would make the Mozambique finds the natural gas equivalent of 5 billion barrels of oil. Brazil's Petrobras has begun drilling offshore in neighboring Tanzania, too.
The idea is to ship all this fuel in the form of liquefied natural gas to Asia. It is part of what the International Energy Agency calls the "Golden Age of Gas."
As we've written previously, this flood of foreign supply -- in addition to Beijing's just-announced plans to subsidize domestic shale gas drilling -- at some point will trigger an escalated demand response in China. Beijing already has plans to triple natural gas consumption to about 10 percent of total energy use, but that is paltry compared with its use of coal, by far the majority component of how the nation is powered. Ultimately, this bonanza of gas supply seems bound to lead to China seriously shift the coal-gas balance; the Chinese will still favor coal by a fair distance, but the gap will be narrower.
Why is that notable? Because China's emissions of CO2 will be far less than anticipated, as the China Energy Group at Berkeley's LBL Laboratory forecast in a study four months ago. LBL projects that China's coal consumption could plunge to 30 percent of overall energy production, from 74 percent in 2005.
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Starbucks is worried about its coffee-making future, leading to its potential expansion into the juice bar business. Experts warn chocolate lovers that cocoa is endangered. To top it off, competitive balance in both the World Cup and international basketball may be turned on its head, suggests a report that says people are shrinking.
In recent days, we have been subject to lifestyle forecasts that for some people will be the most worrisome yet regarding the impact of climate change. Yet we also are getting the usual diet of more standard reflection, including a report from the New York Times' Elizabeth Rosenthal on global warming's swift transformation in the United States from a Nobel Prize-winning avocation to "a four-letter word."
The rise of heat-trapping gases in the atmosphere from the burning of CO2 is a definitive geopolitical issue, as it will eventually make some nations richer and some poorer, some stronger and some weaker. U.S. military leaders have issued repeated reports -- here and here for instance -- that climate change poses a national security threat.
China -- which a few years ago was the most important outlier in the climate-change debate -- now takes the issue seriously, though its economic expansion may eclipse its efforts to reduce emissions, writes Reuters. Around the world, industrial nations are moving to reduce CO2 emissions. But Rosenthal writes that American politics have whipsawed, and complicated, the reduction of emissions.
U.S. ambivalence on the issue is not new -- in the 1990s, then-President Bill Clinton knew he would not get the Kyoto Accords through Senate ratification, so he never submitted the agreement to the process. Yet one wonders whether, if the prospect of rising seas and the loss of national wealth and geopolitical power did not grab attention, the specter of losing a world sports title will.
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In and around Russia, pipeline politics means raw power -- who will exercise influence from Eastern Europe across to the steppes of Kazakhstan. In the United States, it's hardly more subtle: If companies and the Obama administration can navigate no-less-labyrinthine politics, the nation can more comfortably find its way in the Middle East. This lessened fear of lost supplies would coincide with a larger, steady source of both domestic crude, plus Saudi-size reservoirs across the Americas.
U.S.-style pipeline politics center on the proposed 1,600-mile Keystone XL oil pipeline, which would dedicate some 1.1 million barrels a day of Canadian oil to the United States and simultaneously unleash 46 million barrels of oil chronically bottled up as storage in a tiny Oklahoma city. Last Friday, the State Department issued a long-awaited opinion that Alberta oil sands pose no inordinate ecological risk, setting in motion a permitting process that could end up with the construction of the pipeline.
As with the cacophony that accompanies the Russian variety, Keystone has seen no quiet.
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TNK-BP: Clutch play by Dudley puts momentum back with BP? Counter-intuitively, the momentum may have shifted back to BP in its latest high-wire negotiations in Russia. BP's Bob Dudley (pictured above), attempting to turn around the company's fortunes after the costly Gulf of Mexico oil spill a year ago, in January dived into a highly tenuous tie-up with Russia's state-owned Rosneft, with whom it hoped to explore the oil-rich Arctic Sea. The tenuous part came because BP's long-time Russian partners, the grouping of four oligarchs known as AAR, blocked the partnership through tribunal rulings in Europe. As late as yesterday, BP and Dudley seemed to be in deep trouble -- BP had offered to buy out AAR's 50 percent of their Russia-based partnership for $27 billion; AAR apparently counter-offered with an ask of $35 billion, part of which would be paid through 10 percent share holdings of both BP and Rosneft. Dudley balked at the shareholding part, and possibly the money too. But just when hope seemed lost, Dudley got Rosneft to extend what had been a drop-dead deadline yesterday for completing their tie-up. Now BP has until this time next month.
Now a curious thing has happened. In a statement issued today, AAR CEO Stan Polovets advises BP to find a way to honor their partnership agreement faithfully. "We trust that BP will use the extension it has got from Rosneft to ensure that both the Arctic opportunity and the share swap are pursued through a structure consistent with BP's obligations under the TNK-BP shareholder agreement," he said. It's curious because Polovets said almost the identical thing yesterday.
If one is in the catbird seat, one generally remains sphinx-like. Hence, the signal that AAR is a bit uncertain. BP now has time to turn the tables. Chris Weafer, an analyst at UralSib, thinks that the long time extension suggests that the Kremlin intervened at the last minute to keep the deal alive.
Even if he was miserly with the cash -- $35 billion does not seem like too much money for the unlisted company -- Dudley was right to refuse AAR's share demands. He would be a fool to hand over 10 percent of BP -- and hence a board seat -- to the litigious and shark-like AAR, who have shown over the last 15 years a zest for a bloody brawl. Nothing personal, of course.
Should the shale gas tent be folded up? If Cornell Professor Robert Howarth and a couple of his colleagues are correct, there is precious little hope -- very close to none -- of getting greenhouse gas emissions under control and preventing some of the less-pleasant repercussions of climate change. This week, the Howarth team published a paper disputing one of the main assumptions accompanying the U.S. boom in shale gas drilling -- that it is a positive development because natural gas emits half the greenhouse gases of coal, and a third less than oil. Gas, it has been said here and elsewhere, is a "bridge fuel" until an as-yet undetermined non-fossil fuel technology is scaled up to propel the global economy along with the world's private vehicles. But Howarth says that, when one takes into account the methane released during shale gas production, coal in fact comes out cleaner. Given the hoopla surrounding shale gas, Howarth's paper has attracted much attention, including prominent display in the New York Times. But is he right?
Over at the Council on Foreign Relations, Michael Levi isn't so sure. There is no dispute regarding the hazards of methane -- this gas is pernicious. But Levi takes Howarth to task for relying on "isolated cases reported in industry magazines" along with the performance of notoriously bad Russian pipelines for his conclusions regarding how much methane escapes into the atmosphere during hydraulic fracturing, the method by which shale gas is extracted. Levi is at his most brutal in an apparent scientific gaffe -- Howarth used comparative gigajoules in order to measure the methane emissions of shale gas against those of coal. The problem is that gas produces a lot more electricity than coal gigajoule-by-gigajoule, something that Howarth doesn't take account of. For that reason, Levi favors kilowatt-hours for comparison purposes, and regards Howarth's failure to do so as "an unforgivable methodological flaw; correcting for it strongly tilts Howarth's calculations back toward gas, even if you accept everything else he says." Ouch.
Howarth explicitly states his data are thin and that more research is necessary -- methane is under-examined. Levi agrees with him there.
Here is where we return to one of the industry's own big failures to get out in front, figure out its weak points before critics do, and fix them. We have previously suggested that the error-prone shale gas industry ought to police itself, put peer pressure on its own bad actors to straighten up, and openly disclose the content of its fracking fluid. Now a new front has opened up. It could be too late to recover entirely -- the industry is headed for serious federal regulation, the very thing it has sought to avert.Read on for more of the Wrap
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With Hu Jintao in Washington, and China's clean energy manufacturing juggernaut among the thorniest subjects between the U.S. and China, Steven Chu is doing his part to bring down the temperature. In a decade or two, the U.S. energy secretary asserted at a joint dinner last night, the symptoms of climate change will become so apparent that they will wash away the divisive politics we currently see in the United States on the issue. Most everyone will agree there is a serious problem, and the discussion will turn elsewhere, specifically to How Can I Get Rich in Global Warming. And somewhere in the race for wealth, said Chu, the two countries can find collaborative common ground.
It was hard to discern how many people in the packed ballroom at the Mandarin Oriental Hotel bought all that. Friendship? Hard to say. There is much acrimony over China's green subsidies, and Beijing's assertion that the U.S. does the same thing. But if there is agreement between the sides, it's on Chu's point that there is the potential for incredible economic growth for the country that best manages the green-energy manufacturing space, huge sums of cash. As we have discussed previously, the advanced battery and electric car industries alone may become large enough to drive economies.
It seems to me that, given the stakes, it will be hard to collaborate seriously, as Chu suggests. Yet the show of comradeship was there. Earlier yesterday, Wan Gang, China's celebrity minister for science and technology, called clean energy cooperation a potential "bright spot" in the two countries' relations, Reuters' Timothy Gardner and Ayesha Rascoe write. One possible area of cooperative business is the development of nuclear power - Bill Gates is talking up the deployment of a new U.S.-designed reactor in China that would not make it past U.S. regulators given years and years of trying, as Matthew Wald writes at the New York Times. If it's tried and works in China, it can be rolled out internationally.
The two sides orchestrated the signature of business deals. Yet one got the impression that at least some of this was of the Potemkin type - much nice talk without many of the details worked out. For example, Alcoa announced a $7.5 billion agreement to work with the China Power Investment Corp., but the sides actually have not agreed on any specific projects, nor any specific dollar amounts, Natalie Doss, Xiao Yu and Feifei Shen report at Bloomberg.
Chu, a Nobel laureate, said that some of his greatest scientific rivals have become his best friends. But he also noted a stark fact, which is that it's easy to be gracious once one wins the race: "The second person to say that E=MC2 doesn't get much credit." Which is why some of the rough edges can be shaved off, but the highly emotional atmosphere is likely to continue.
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.