Oil Tabloid, N, 1 Inglese

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tabloid

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ar from being a house organ, in launching the first issue of “Oil” our intentions are otherwise, as our readers will be able to judge for themselves.

At a time when public opinion seems to be giving renewed attention to the subject of energy, though not without interrogatives, uncertainties and apprehension, a company such as Eni recognizes its responsibility to contribute and promote a new awareness of the issues in which it is involved as a protagonist on the international scene. By informing, documenting and provoking debate it will be able to contribute to the formation of a veritable culture on the subject of oil and energy.

This is the task entrusted to “Oil”.

Without disregarding the high profile experts in the sector, guaranteeing them adequate documented information backed up by authoritative texts, the magazine will give particular attention to a much wider readership, people who are not actually involved in the sector but who are interested in the subject and eager to understand. Popular terminology, not specialized language therefore, and articles of wide interest.

Naturally, oil is the central theme, together with other important social, cultural and economic issues which agitate world opinion and which gravitate around the theme of energy: from the environment to geopolitics, alternative sources to imbalances in world economy, etc. The importance of safeguarding the environment and finding a sustainable energy system in the interests of health and respect for the individual and the community are values that have always characterized Eni’s way of conducting its affairs right from the start.

We will pursue our objective with absolute commitment, completeness and clarity, as well as frankness in tackling themes which we realize are awkward and controversial. This approach is manifested by the very name

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Eni quarterly – Year I No. 1 May 2008 Authorisation from Court of Rome no. 19/2008 dated 21/01/2008 Editor-in-chief:

Gianni Di Giovanni Editorial committee:

Stefano Lucchini Editorial committee:

Lucia Annunziata, Bernardo Bortolotti, Valerio Castronovo, Alberto Clò, Marta Dassù, Edoardo De Biasi, Guido Gentili, Harold W. Kroto, Raffaella Leone, Leonardo Maugeri, Adnane Mokrani, Edward Morse, Moises Naim, Joaquin Navarro Valls, Paolo Nicolini, Daniel G. Nocera, Mario Pirani, Federico Rampini, Marco Ravaglioli, Sergio Romano, Carlo Rossella, Giulio Sapelli, Giuseppe Turani, Enzo Viscusi Coordinator of editorial committee:

Lucia Annunziata Editorial team: Editorial team coordination:

Clara Sanna Alessandra Mina, Serena Sabino, Giandomenico Serrao Authors:

Simonetta Della Seta, Andrea Romano, James Hansen Photography:

Archivio Storico Eni, Claudio Brufola, Grazia Neri, Getty Images, Riccardi Agr, Marino Paoloni Editing and production:

AGI, via Cristoforo Colombo, 98 00147 Roma tel +39 06 51996254 -385 fax + 39 06 51996286 e-mail: redazione@oilonline.it Graphic layout:

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Cynthia Sgarallino Sabrina Mossetto

by Paolo Scaroni Exclusive: Abraham B. Yehoshua

Printer:

Arti Grafiche Amilcare Pizzi Spa Cinisello Balsamo - Milano Translated by www.AgostiniAssociati.com

4 The oil legend talks about how the Arabs and Israelis view oil

by Simonetta Della Seta Exclusive: Chakib Khelil

Closed for editing 22 april 2008 Printed on Cartiere Cariolaro E 2000 recycled ecological paper.

This paper is made with 100% waste paper, treated with a modern de-inking system utilising advanced technologies and production processes that do not use chlorine or whitening agents.

8 Today the dollar. Tomorrow the yuan

14 Editor Eni Spa Chairman: Roberto Poli Chief executive officer: Paolo Scaroni Board of Directors:

Alberto Clò, Renzo Costi, Marco Pinto, Marco Reboa, Mario Resca, Pierluigi Scibetta Piazzale Enrico Mattei, 1 00144 Roma – www.eni.it

OPINIONS Editorial

Energy is the central issue

Graphic consultant:

by Clara Sanna Feature

The dutch disease

by Thomas L. Friedman

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FACE TO FACE: PEAK OIL

For how mach longer 20 In 10 or 20 years… maybe today

by Robert Hirsch

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N.

26 The day ok peak oil? It will come but we won’t see it

by Vijay V. Vaitheeswaran

28 The indescribable mistery of oil

by Leonardo Maugeri

of the magazine, “Oil”, suggestive of many associated ideas, including the negative ones it brings in its wake (power, riches, war, pollution).

As we undertake this ambitious task we are aware that we are following in the footsteps of a glorious tradition of editorial and cultural commitment which has always characterized Eni and are proud to do so. The tradition was inaugurated by Enrico Mattei, on the basis of his intuition that, not only did business and culture not represent irreconcilable realities but that, on the contrary, it was in the interests of the company to consider social implications and even its vocation to do so in such a moment of extraordinary reconstruction. The tradition started off with the magazine “Gatto selvatico” (Wild cat) which Mattei personally sponsored (not by chance we are dedicating considerable importance to this publication in the first issue of its ‘heir’ Oil) Attilio Bertolucci was its memorable first editor; Emilio Gadda, Leonardo Sciascia, Natalia Ginzburg to mention just a few, were collaborators in the first magazine of the ‘six-legged dog’, then, over the years, the tradition continued with Eni, Ecos and Eni’s way. We hope that the spirit of the magazine and its aims are clearly manifest in this first issue. Ample space has been given to people not closely associated with the world of energy: such as the Israeli writer A. Yeoshua and T. L. Friedman, an authoritative commentator for the New York Time. Then there is an in-depth analysis of the crucial question of the availability of world oil resources and the question of “peak oil”, which animates an intense and preoccupying debate between people.

Then there are the “tools of the trade”: press reviews, write-ups, announcements and summaries of the principle initiatives of research and debate. Still further: data, statistics and graphs. Such understanding will reveal its extraordinary fascination.

A magazine to understand

by GIANNI DI GIOVANNI

31 China, mission reserves

by Federico Rampini

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WORKING TOOLS Forecasts from Italy

The inadequate europeanism of italian politics

by Andrea Romano Euroenergy

36 The utopia of the perfect market

by Guido Gentili The way we were

38 A wildcat and a poet for Eni’s culture

by Stefano Lucchini Data

39 What matters the most is what is not there

by James Hansen Data

41 Preparing for the unthinkable a cura dell’ufficio studi Eni

42 Books and News from Italy and worldwide 46 Events in Italy and worldwide

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Editorial

Energy is the crucial issue here is no doubt that energy is a hot topic. Both in Italy and beyond, in government plans for important choices which concern the future of the planet, in dealing with questions on economic and social development of a country, and facing the uneasiness regarding the survival itself of entire populations threatened by under-development and hunger, above all it is energy

by PAOLO which is being talked about.

SCARONI Availability of energy, coming from where, at what price, by what Eni CEO means. Energy for heating, energy for transporting goods and people, energy for lighting, energy for producing, energy for guaranteeing, in other words, the fundamental conditions for everyday life, even coming before the development or wellbeing of a population.

Yet these vital topics are not often discussed outside employee’s work environments. Public opinion discovers how much the energy issue can affect life, and the precariousness of the balancing act which guarantees energy security, only when a crisis puts it in doubt. It happened during the oil embargo in ‘73, and more recently in 2006 when tensions between Russia and the Ukraine threatened to block supplies of gas and leave Europe in the cold right in the middle of the Christmas festivities.

Furthermore, there is often the impression that the subject of energy is hard put to attract attention in political debate, and that choices that should be strategic and long range appear to be dictated by contingent necessities or following on from the initiatives of companies in the sector. And in this it is not possible to complain about the significant absence of the European Union; the right organisation which should argue grand strategies, which the populations of the old continent can adopt and win, the European Union which instead seems occupied in defining bureaucratic details and fastidious rules.

This must all change. We are convinced that a strong, consistent policy must be adopted at a global level (but starting at a local level) on the subject of energy in the future. However, we know that this will only be possible when the debate on these issues leaves the rooms of the experts to involve the citizens, making them active

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To inform, to discuss, to make aware to contribute to creating a new oil culture and reflecting on energy topics This is what Oil wants to do

participants in the decision-making process. What is required is more information, more open debate, and deeper, documented reflection. ‘Oil’ wants to contribute to this.

A magazine that wants to be a container for reflection across the board on the subject of energy (oil initially but not only), alongside documentation on the various aspects of this subject, which involves politics, finance, economy, social life, and also culture and traditions. A magazine open to differing opinions, a privileged place for an international debate on arguments which know no limits.

With considerable attention on the main questions of the day, it is not by chance that this first edition of ‘Oil’ dedicates significant space to the subject of the scarcity of oil resources: ‘the peak oil’. This is a crucial issue which really must be looked into in depth. At the end of the era of hydrocarbon fossils (sure end, even if not imminent), we have responses which do not allay our fears. Progress is being made in the research into renewable energy sources, the sun, and bio-fuels, but cannot yet provide us with guarantees as regards the ‘after oil period’; a policy of efficiency and investment is required, in order to extend the lifetime of fossil fuels as much as possible.

A policy to which Eni is committed but for which a wider international initiative is necessary, which cannot disregard public opinion: the necessary component for every effort in this land. To understand the impact of intelligently using oil it is sufficient to remember that American drivers with European consumption levels would allow a saving of all the oil produced annually by a country like Iran. With many more laws and regulations, the ‘miracle’ could be realised through the pressure of car buyers, convinced by the requirement to save petrol.

On this subject we cannot allay our fears of the forecast that we will most likely have enough hydrocarbon fuel for consumption for some decades to come. We cannot allay our fears if, as the market has been showing for months, prices higher than ever in the past will ensure the availability of crude oil. Whereas Western economies are capable of supporting the mark-ups, developing countries are not. Can we pretend to ignore the further deep injustices suffered by our poorer populations, which are made even poorer by the waste of the richest?? Another crucial issue which we will have to discuss.

To inform, to debate, to make aware: in short, to contribute in creating a new ‘oil culture’, absent in today’s society of wellbeing and unlimited consumption. Eni, with ‘Oil’ wants to do this.

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Exclusive: Abraham B. Yehoshua

The oil legend talks about how the Arabs and Israelis view oil Over 62% of world oil production is in Arab and Muslim hands, and I see that Israel still exists while the Palestinians struggle to build their own state. We’ve beaten oil

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hat’s the first thing that comes to mind when you hear the word “oil”?

I think, that we don’t have oil, it’s the Arabs who have it. I associate oil with the Arabs.

Since my childhood I’ve always seen this connection very clearly: the Arabs have the oil and the Jews don’t. We have to use our heads and a lot of other resources, but we can’t use oil.

Oil has something of a mythological attribute, then. What do you think is behind that?

Oil is a marvellous substance, because it’s made from organic components: minuscule creatures and plants that decomposed over millions of years. Another great thing about oil is that it’s a single product, but it’s used in an enormous number of different ways, absolutely nothing is discarded: it’s a raw material that is used in its totality. Oil is exceptionally useful because it generates energy and progress. It’s not giving the whole picture if you just label it as a pollutant. We should instead consider its positive contribution, the pluralism of its uses, in industry and in life. Even the clothes we wear owe something to oil.

Definitely, for Jews (or at least for Israelis) oil represents the competition: we have justice (?), they have oil. Anyway, when I read that over 62% of world oil production is in Arab and Muslim hands, and I see that Israel still exists while the Palestinians struggle to build their own state, then I tell myself: we’ve beaten oil, even if only politically.

by SIMONETTA DELLA SETA

What does that mean?

If the Arab countries have so much oil, the essential element for economy and power, but nevertheless they have not yet succeeded in eliminating Israel. They haven’t managed to make an international boycott work on Israel either, and that means that we’ve beaten the forces of oil. With all of oil’s importance and necessity, the very existence of Israel has demonstrated that it’s even more crucial and that its recognition cannot be ignored.

Abraham B. Yehoshua He signs his name Abraham B. Yehoshua, the ‘B’ standing for Buli, the affectionate nickname by which relatives and friends have known him since he was a small child.

Author of novels, short stories, dramas and essays, Yehoshua is considered, both at home and abroad, to be

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one of the foremost Israeli writers and is one of the most authoritative public figures in his country.

He has won all the literary prizes awarded in Israel, including the prestigious Israel Prize for Literature in 1995.

He has also received numerous international awards, amongst which the National Jewish Book Award in the United States, the

Jewish QuarterlyWingate in Great Britain and the Boccaccio Viareggio and Lampedusa Prizes in Italy.

Whilst the literary work of Yehoshua focuses on the complexities of the individual psyche against a social, cultural and family background, his essays deal with ideological, political and ethical themes. In these essays,

Scholar and journalist, Simonetta Della Seta is an expert in Middle Eastern and Jewish history. She graduated in Political Science under the tutelage of prof. Renzo De Felice, with whom she has collaborated on numerous research projects in connection with the Jewish communities in the Mediterranean.

She continued her studies at Brandeis University, earning a Fulbright Scholarship to study Middle Eastern history, and at the Jewish University of Jerusalem where she studied the history of the Jewish people. She has worked as a Middle Eastern correspondent for Il Giornale, Panorama and the Mediaset networks for many years. From January 2001 to April 2004 she was central editor-in-chief of the Apbiscom Press Agency (today Apcom), of which she is also one of the founders. Her books include: Israeliani e palestinesi, il costo della non pace (‘Israelis and Palestinians, the cost of not being at peace’), published by GiuntinaNardini, 1999; Il Guardiano del Santo Sepolcro (‘The Guardian of the Holy Sepulchre’), published by Mondadori, 2000; La natura dello Stato ebraico (‘The nature of the Jewish State’), to be published shortly by Bruno Mondadori.

Since 1st February 2005 she has been director of the Italian Cultural Institute in Tel Aviv. .

In your opinion, why didn’t the boycott work?

I think the economic boycott of Israel didn’t work mainly because the Arabs are afraid of losing customers and the precious money that they bring. Oil can be bought outside of the Middle East as well, and the fear that the countries of the West could easily find or even develop other energy sources has

the writer explores and frequently casts doubts on the dogmas of Israeli society: Judaism, Zionism, religion and nationalism, the IsraeliPalestinian conflict and anti-Semitism.

Yehoshua’s books have been translated into twenty-six languages (in Italy they have been published by Einaudi), with numerous stories and novels adapted for the theatre, cinema,

television and opera.

Yehoshua was born in Jerusalem on 9th December 1936, a fifth generation Sephardi on his father’s side and first generation on his mother’s. His father, Jacob Yehoshua, is an Orientalist, a scholar of the Palestinian language, history and culture, who opened his son’s eyes to the unique nature of the Palestine question, indirectly

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Interview

Loved abroad, where he is known for his commitment to peace, Yehoshua is an intellectual figure right across the board.

Novelist and essayist, also involved in narratives and theatrical works, he is the best known Israeli writer in the world

made the Arabs a lot more cautious in their calls for a political and economic boycott of Israel. Let’s not forget, either, that the global economy has minimised the impact of a boycott, since almost all big companies can create subsidiaries that can sell their products to boycotted countries anyway. For this same reason I don’t see sanctions working against Iran either.

Yet that’s exactly what the Israeli government is asking the world to do.

Most oil in the Middle East is sent to the east. Iran has huge customers in Asia: China, India, countries that are increasingly developed in industrial terms. I don’t think that a boycott by the West can really influence its development and especially I don’t think it can stop its nuclear programme. What’s needed is to make guarantees to Iran that are so heavy that it will not consider adopting offensive weapons, only defensive. After the war in Iraq, Teheran knows very well that the Americans can attack. I think that today, no country in the Middle East wants to start a global war against Israel. One of the reasons is oil: they know that today Israel has the power to destroy their oil infrastructure immediately.

too much. Some of them, like Saudi Arabia and Kuwait, have decided some time ago not to use oil against Israel. It could backfire against them.

That means that for Israel, Arab oil rigs and refineries can be considered a military Achilles’ heel.

Nothing new there. Even in the war of attrition that followed after the Six-Day War (1967), one of the reasons why Egypt accepted the ceasefire with Israel in 1970 was the fear that Israel would attack Egyptian oil wells, which they had already begun doing. There’s no doubt that the oil in Sinai was a temptation for Israel to not give in easily to the peace deal being brokered by the Americans. And maybe oil was one of the principal causes of the Yom Kippur war in 1973, deriving from Egyptian fears that the Israelis had their eyes set on Sinai oil.

By breaking the status quo with the war, they hoped to make the Israelis evacuate Sinai once and for all.

Is fear spreading to all Arab countries?

Having oil is definitely a weapon, but the way things are today it makes the Middle East countries more vulnerable because it wouldn’t be difficult for Israel to wipe out their refineries and rigs with the military power it has built up. This is another reason that, although the Arab states want to use oil as a weapon, they’re being very careful not to wave it around

Was that the period when Israel felt it was closest to having oil?

Definitely. I remember it very clearly. The Israelis had always tried to get oil. I remember as if it were yesterday, one day in the 1950s when the radio announced that we had finally found oil near the city of Ashkelon: the emotion was incredible, everyone was talking about it, what a sensation it was that we were now finally equal to the Arabs. In reality the quantity of crude found was so small that the whole operation was broken up in short order.

So when we took Sinai – and I remember this personally be-

influencing his general outlook. Abraham drew on his father’s voluminous library when writing his novel Mr. Mani (1990), whilst the background of his mother, Malka Rosolio, born in Morocco and daughter to a rich merchant, inspired his book Voyage to the End of the Millennium (1997). His early experience with the moderate Jewish

published his first short stories, later put together and published in his first book The Death of the Old Man (1962). He graduated and started teaching literature at Jerusalem before moving to Paris where he lived from 1963 to 1967, employed first as headmaster of a school and then as secretary general of the World Union of Jewish Students. In Paris he

Sephardic tradition, together with his lay and Zionist education, have stirred his unceasing interest in complex identity problems, very much the leitmotif of his entire production.

After completing his military service in 1957, Yehoshua followed courses in literature and philosophy at the University of Haifa and

completed his second book of tales and short stories, Three Days and a Child (1968). He published four collections of short stories before writing his first novel, and his subsequent writing would mostly take the form of this genre. He received attention from the critics right from his early short stories.

They perceived the influence of Shmuel

Yoseph Agnon and Franz Kafka in his work and recognized his undoubted talent, anticipating that he would eventually make an important contribution to world literature.

Returning to Israel immediately after the war in 1967, he entered the University of Haifa as head of the department for the promotion of immigrant

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sn’t increased the standard of living disproportionately or too quickly. On the contrary, it guarantees a continuity of the quality of life for all Norwegians, by keeping the society active and productive, not by reducing payment of taxes but basically by applying standards to oil extraction that we could define as ‘moral’.

Do you think Arab countries could do that too?

Definitely. I don’t know each individual country in great detail, but I think that in the Emirates they manage better than in other countries to distribute the oil wealth more equably. At least, that’s what I believe based on the impressions I’m getting. Nice buildings, good technology: better use of their health and wealth.

cause in 1956 I served in the Sinai campaign – we understood the importance of those oilfields. I was in Ras Sudar, an oil town, for a whole month: everything there was based on the oil business. We experienced at first hand what it meant to have oil and we understood why it had assumed such legendary importance in the Arab world.

At the end of the day you all live in the same deserts, on adjacent territories. Wasn’t it simply bad luck that you never found even a single oil well?

No, quite the opposite. I can confirm that not finding oil was in many ways a good thing. It prevented us from depending on oil, it drove us to look for other sources of energy, it made us use our activities in the sector in more sophisticated ways, and it stimulated us in other directions, like high technology for example. Oil makes you lazy. That’s what happened to the Arabs. I read that the town of Jeddah has an ongoing problem with junking tens of thousands of cars abandoned in the street, maybe because the petrol tank is empty and it was easier to just buy a new car. This kind of easy wealth, especially if it’s given to a certain social class, makes people lazy and it makes society a bit lazy as well.

The dream that became a trap?

Let me be clear: it’s only right that the Arab countries have oil.

Call it a form of compensation for the fact that they’ve got a lot of desert. We Israelis have often seen it that way: they have no lakes, no forests, no mountains, but they have oil. It is, however, true that an advantage can easily be transformed into a disadvantage because the easy exploitation of oil can put a brake on initiative, on production, and on development. That’s not always the case, though. Take a completely different example: Norway. They have a lot of oil, but this resource ha-

students and members of minorities, and in 1972 he was appointed professor of Comparative Hebrew Literature, a post which he held until he retired from teaching in 2002.

Following the six-day war and the changes which followed, Yehoshua, active in several left-wing movements, published his first essays developing his own

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political and ideological position. Thanks to this activism and his intellectual and rhetorical capacities, he came to be considered, both at home and abroad, as one of the principle spokesmen for left-wing Israeli pacifism. Most of his essays, often controversial, were collected into three volumes: For Normality (1980); Between Right

and Right (1981) and The Wall and the Mountain (1989).

Another collection of essays, The Terrible Power of Minor Guilt (1998), is centred around the moral dilemmas at the basis of great literary texts.

After publishing his first novel, The Lover (1977), Yehoshua wrote eight short stories in which he explores new artistic forms, widening

Do you think that oil has ever been a factor in the Middle East conflicts?

No, I don’t. One of the more depressing observations has been that Arabian oil has never helped the Palestinians. The billions of dollars coming from the sale of oil have never been invested in helping the Palestinian cause, or in construction in Palestine, or to create infrastructure, or give them jobs, or close the refugee camps. Yes, it’s true that the Arab states have made sure that the Palestinians survive and not collapsed, but at the same time they’ve stopped short of really giving them a hand up, i.e. making them happier people and able to negotiate from a stronger position, to obtain a solid agreement with Israel. After Israel’s retreat from Gaza, if Saudi Arabia had talked with Hamas and promised, in exchange for a ceasefire with Israel, to invest properly in the Gaza Strip and create a sort of Palestinian Singapore, this would have made the Israelis retreat from the trans-Jordan quickly as well. The way that the Arab states support the Palestinians – keeping them alive, but without really helping them – only serves to keep the conflict going.

Has oil been a factor in the Middle East conflict in the wider sense?

You mean, did the Americans declare war on Iraq for its oil?

Definitely not. With hindsight we know that it was a stupid war, but oil isn’t the reason the US went into Iraq. And even if the US had wanted to take control of what little oil the Iraqis have, don’t you think they spent much more money just to mount that war? The record of Iraqi oil doesn’t stand up to scrutiny. I think that what made the Americans go to war was the fear of Bin Laden and Saddam Hussein’s nuclear weapons programme. But they made a huge mistake. Not being able to uproot a dictatorship, they should have contented themselves with changing a few people at the top, instead of destroying a whole system – or destroying a whole country, more correctly. But that’s another story.

Can we relate to oil as a metaphor: very precious, yet heavy and sticky?

As I’ve already said, oil can represent an advantage and at the same time it can be a danger. This is true politically but it’s also true in terms of energy. It can, for example, become an enemy of the environment in the eyes of many. If oil became cheaper, the threat of pollution would rise. We have to understand this ambivalence, protect ourselves from these scenarios and prevent them. I remember after the Yom Kip-

the historic narrative and restoring the writer to “his lost authority to deal with social, economic, historic and ideological themes”.

The background to his first two novels, The Lover and A Late Divorce (1982), as well as the majority of his later work, is the family, a place of character and identity formation and a mirror image of society. Mr.

Mani, acclaimed by the public and critics alike, is the most important and ambitious of his novels. It is also the work of modern Jewish literature most studied by the critics. As in the preceding book, Molcho (1987, translated as The Five Seasons), the original nature of the setting comes from the juxtaposition of the Sephardic dimension (or the original

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Interview pur War in 1975, the Shah of Iran announced caps on the production and sale of oil, to make the West develop alternative energies. The idea was, we have to prepare for it, otherwise one day the energy will run out. I think this is a very correct attitude, one that we can learn from. So, we have to keep oil prices down, but we also have to find new wells, and we also have to develop forms of alternative energies.

The dispute, the tension between these two extremes will last for eternity, I think.

That’s the general dilemma with progress and science: how far to push ahead and how far to cut back.

I think we have to work towards a progress that’s positive and controlled, at times slower but also safer.

Why is it that the Israelis have never given the impression of being obsessed by the energy question?

At the beginning we used it often as an excuse: if we were beaten in a UN vote for example, it was always because of oil. As time went on we understood that it didn’t work – either as a weapon or as an excuse – even for us. As an instrument of struggle and dispute, the intifada has been much more effective and realistic than oil.

Do you consider yourselves an example, i.e. a country without oil, surrounded by oil, that has resisted the power of oil (or the mythology of oil)?

There are many other countries without oil. And in any case I don’t think that the oil factor is a negative one today for Israel, quite the contrary in fact. Paradoxically, oil could play a new and positive role in resolving the conflict.

What role is that?

Behind the peace proposal recently made by the Arab states to Israel is actually their fear of Iran, their desire to avoid the growing danger that Iran presents for the region, because of the nuclear programme of course but also because of the oil that Teheran is selling freely to China and India. Think back to what happened in 1991 when Iraq invaded Kuwait: part of the Arab world rebelled against Saddam Hussein. Now they can see the danger of Iran and they understand that it’s better to reach an agreement with Israel than it is to risk a global regional conflict, with Iran so powerful.

The proposal made by the Arab League to Israel is therefore linked to the Iranian threat.

Yes, definitely. Iran is developing nuclear power and also it’s from Iran that Middle East oil is sold to all of Asia and the Far East. There’s also the danger that Iran could incite the Arab world to revolt against its own regimes. The Arabs have always used the Palestinian question to bind their populations together and so avoid internal revolts. Today the problem is the reverse. It could be Iran to use the Palestinian question, through Hamas, to derive benefit for its power in the region and strengthen the fundamentalist groups in the various different countries. That’s a prospect that the more moderate Arab states don’t like. That’s why I can see an opportunity opening up. But the solution will come only if these Arab countries decide to make financial investments, give the Palestinians a real hand up and make Israel retreat from the trans-Jordan as well.

HispanicMediterranean Jewish stock) and the Ashkenazi (originating from Germanic and Eastern European Jewish stock) The genealogical novel investigates the often disastrous effects that the personal and collective subconscious can have on individuals and nations. A plot full of sentiments and psychological problems

that have universal impact.

A passion for travelling, restlessness and a tendency to reveal subconscious anxieties and desires, lead many of Yehoshua’s characters to take an adventurous course of action in unknown continents, where confrontation with the irrational becomes inevitable. An example of this is Benji’s

Where does Israel's oil come from?

Mainly from Egypt, but also from Turkey and from some Asian countries. With Egypt, trade is very important. We’re a good customer and we’re right on their doorstep. It’s one of the positive aspects of the peace accords signed by Begin and Sadat. In any case Israel is also trying to use other forms of energy: coal, gas and water.

Do you have local sources of natural energy?

Almost none. That’s why we’ve developed our brains. There’s nothing genetic about it, it was purely a case of necessity. We’d like to use our heads to cooperate with our neighbours.

Could the difference in mentalities between the Arab states and Israel be a barrier to cooperation?

Absolutely not. Look at all the common initiatives Israel has developed in recent years with China, a country with which we have almost nothing in common. All we need is the will and a common goal. We need to arrive at a solution soon. The ingredients are the will, money and military guarantees. But the Arab world has to be persuaded that reaching a peace agreement is in its best interests.

Why doesn’t oil inspire art? In your opinion, why has oil never been the theme of novels, films, or the theatre?

Because it doesn’t involve a struggle of man against nature.

Looking for oil or pumping it out of the ground has no drama, no conflict. Oil belongs to the land in which it’s found. It can’t be a private good, it can’t be contested between people, it can’t be stolen or hidden. It won’t damage a village or even a person. Water, for example, flows from one place to another and so it can create conflicts. Gold belongs to whoever finds it. But oil is either there or it isn’t, and it’s linked to that place: it can’t elicit moral conflicts. We can write a story about diamonds, but not oil. There’s no feeling in it.

In your books you describe the drama of human sentiment very well. Don’t you think that people are increasingly anguished about energy and environmental questions?

Oil is a primary resource, like land or water. The anguish you mention isn’t about the oil but about how it can be used. This emotion is alleviated by our trust in technology. My feeling is that people believe that technology will help us find better solutions. My son works in the Israeli Ministry of the Environment. I was reassured to hear from him that awareness of environmental problems is growing very rapidly, at least in Israel, and that there’s a definite level of confidence that things will improve. The important thing is to start from a strong information base. That, together with science and technology, is what I hope will save us from global warming, from pollution and from other problems.

For Israel, not finding oil was in many ways a good thing. It drove us to look for other sources of energy, it stimulated us towards high technology.

Oil makes you lazy

Can you imagine a world without oil?

No, I can’t. I’m no expert, but I believe there’s still a lot of it down there. Maybe it’ll be used in different quantities, or in different ways – I’m thinking of air travel – but we’ll never be able to easily break free from finding it and using it. We know that it’s not a weapon, nor is it an excuse, or even a solution.

But the world needs oil.

passage through India and from India in the book Return from India (1994); the sea voyage of Ben Attar at the end of the first millennium in Voyage to the End of the Millennium; The continual journeys of prof. Rivlin to Jerusalem, along the Jordan Valley, and to a village in Galilee in The Liberating Bride (2002); and the Calvary suffered by a human

resources manager in an anonymous town in Northern Europe in The Mission of the Human Resource Man (2004); finally, the protagonist of his last novel Friendly Fire, who gets lost in Africa to escape from the difficulties of life. Yehoshua has extended his descriptive intensity in describing dramatic often fatal situations to theatrical works such

as Night in May (1969) and Possession (1986).

Many of his stories and novels have been adapted for the theatre (Mr. Mani); for the cinema (The Lover) and, recently (2005), for opera (the libretto written by Yehoshua himself is based on Voyage to the End of the Millennium. It will go on stage at the Teatro dell’Opera of Rome in May 2008).

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Exclusive: Opec president Chakib Khelil talks

Today the dollar.

Tomorrow the yuan One day the oil will run out, but that day won’t be tomorrow: maybe in 50 or 100 years. Instead of the oil peak it is better to speak of a demand peak. For the future, Opec sees greatness in China Our target is the satisfaction of this generation’s and of future generations’ energy needs at the lowest cost and with the lowest environmental impact possible

Chakib Khelil Since January 2008, Chakib Khelil has been president of Opec. Born in Oujda, in the north of Morocco on 8th August 1939, he graduated from the University of Texas A & M with a thesis on oil engineering and, after working for a few years in the United States (for Shell and Phillips Petroleum), in 1971 he went back to Algeria and entered

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as oil price really reached its peak? Is there the possibility to further increase the oil extraction consequently to the increasing demand of oil worldwide? Chakib Khelil, one of the leader specialists in the sector and OPEC's president at present, has no doubts: one day oil will deplete. It will not happen tomorrow, maybe in 50 or 100 years but for that day vehicles will not run on gasoline.

“What has occurred with regards to coal,” explains Khelil in the interview, “will occur

by CLARA SANNA with regards to oil, too: coal reserves are larger than oil ones. Their utilization though decreased with time as oil was considered to be more economic and flexible.

In the meantime, thanks to the technological progress, man has discovered alternative energy sources, and other more competitive products will be found. So, finally we may not worry because,” as Khelil underlines, “my personal thought is that oil will be less and less utilized with time, so what we shall see is a ‘demand peak’ rather than an ‘oil peak’.”

H

President, the words ‘oil peak’ are on everyone’s lips.

But are we really approaching the point of no return?

Have we reached the maximum production of petroleum?

Acknowledging the fact that reserves are limited, the idea of an "oil peak" derives from the study made by Marion King Hubbert in the United States. This theory is graphically represented by a bell curve that shows how after depleting half of the reserve, a decline will follow. I think that Hubbert has not considered that thanks to the technological progress, reserves have increased a lot. For instance, we have now te-

Sonatrach. He was then appointed president of the “VALHYD group” (Hydrocarbon Development Plan of Algeria) and in 1980 he entered the World Bank where he dealt with oil projects regarding Africa, Asia and America. He left the World Bank in 1999 to become minister for Mines and Energy under president Abdelaziz Bouteflika. In the meantime he also

became president of the Algerian hydrocarbon authority, Sonatrach.

As minister he inaugurated a period of progressive liberalization of the Algerian oil market and has had laws on energy, mines and hydrocarbons passed which have brought about a changed relationship between Sonatrach, a public company, and foreign companies.

chnologies enabling us to find oil in places where we would have never thought it would be like in the sea depth, or allowing us to extract a higher volume of oil from the same oilfield. Therefore, technology is quite important. It must be added though that there are still many places in the world that have not been explored yet. So, I think that oil will deplete in the long term but in the reference period - the next 50/100 years - there won't be a crisis. My point of view is that what has occurred with coal, will occur with oil, too: coal reserves are greater than oil ones. Their utilization though had decreased with time as oil was considered to be more economic and flexible. Coal extraction has decreased not because the coal reserves are limited but because its consumption has decreased. My opinion is that oil will be used lesser and lesser in the future as a result of its cost and to its impact on the environment. Other more competitive energy sources will be found, such as bio-ethanol which is replacing oil-fuel and petrol. Just to mention an example. Another example is given by what has happened in the energy production sector where oil has been replaced by natural gas at first, and by other resources such as solar, wind and nuclear power.

Personally, I think that we shall have a decrease in the utilization of oil as energy source in the future, but there will be a "peak of demand" rather than a "peak of oil" by the theory expressed in a recent article on the "Petrol Strategies" a journal published in France.

So, if we put together your two replies, what you mean is that peak oil is not so close, but we shall be ready at the same time to begin the development of new energy resources?

Yes, exactly. We shall acquire a good grounding as experience is necessary as well as training, laboratories where to make researches and funds availability, on Europe's trails. We are Eni's partners in other countries besides Algeria and Italy. We have some customers in Italy that are buying both liquid and gaseous gas and Eni cannot play a greater role for now in the Country on account of the liberalization process.

For this reason we cannot depend on Eni but we can directly distribute by ourselves on the market small quantities of gas, 3 or 4 million cu. meters. Not very much really... It will help us to build up experience and give us an idea on how the market works. This is of the highest importance for Algeria. At the same time, we want to work with Eni in many other sectors and in particular in the prospecting sector. We are already cooperating, in Algeria of course but also in Mali.

We are contemporaneously trying to identify other Countries which we can cooperate with. Maybe the next one could be Nigeria. We are absolutely not setting limits to that. We have a long-dated relationship with Italy and for this reason the gas pipeline has been entitled to Enrico Mattei. In addition, Algeria is the setting of many roman ruins, Djemila and Tipasa, Tigad all beautiful places where roman ruins are probably best worldwide preserved.

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Interview Let's we talk about the energy policy in your Country.

Which are the future strategies and scenarios?

I think the scenarios that are in store for our Country -as for the petrol demand in the future - are not different from the Italian or American ones exception made for the fact that we have more oil and more gas, at present. Our target - both for Algeria and Italy - is in my opinion the satisfaction of this generation and of the future ones' energy need to the lowest cost and with the lowest environmental impact possible.

So, even if we have larger reserves than a country like Italy, we are already looking for alternative resources. We cannot wait for the depletion of our oil reserves before starting to look for solutions. It is necessary to start moving before this happens. Solar power has already been taken into consideration. We are just building a 150 MW plant powered by gas and solar power. This project is 350 million dollars worth.

With time passing, we shall use lesser gas and more solar power till, thanks to technological progress, we shall only use the solar power. This may happen in 20 maybe 30 years when finally we shall be able to make it happen thanks to the production costs decrease consequently to the technological developments obtained. For now, we are evaluating all the possible options such as oil, gas, wind, solar and nuclear power looking for the one that will be the cheapest in the long term, just like any other country is doing. One of the aspects we are taking into consideration is safety in the power supply. For this reason we are more inclined towards solar rather than nuclear power. Ours is a sunny country. On the contrary nuclear power is based on uranium which is a resource destined to deplete, too. What I mean is that we need to diversify and use energy in a more efficient way. For this reason now, when you listen to the radio in the morning, you can always listen also in Algeria a message for its people on how to save energy. There is a woman talking to her husband and saying how high is the electricity bill. To save money, says the ad, just use natural light instead of artificial one! The same applies to the energy saving connected to a more aware and correct utilization of household appliances. We are working on efficiency, energy storage, and we are already using energy derived from different resources. We hope to be able to rely upon those energies in the future rather than petroleum and gas.

What do you think about the Old World, the West World and the emerging Powers like China and other super-nations relationships?

I think that the relationship with China and India has been quite good till now because these countries need our technology and techniques. They sell products, resources, goods and services to the Western Countries: to America, to Europe and take from them the benefits deriving from the information or nuclear technology. If you look at China you will see that all types of technologies are present, not only one type. Moreover, they have their own technology. As well as the American, French, Canadian one and their own nuclear technology, too. So, I imagine they are doing the same thing with petroleum technologies, and they are piling them up at a high rate. They are becoming very competitive as a result of the low cost of workers both specialized and trained ones and simple manpower. These countries, only economic powers to date, are now becoming financial powers too as they are stocking reserves and a lot of dollars. They have so the power to control financial tools like those ones available at Morgan or at other big financial groups. Hence, a new politic power stems from this new financial power. So, as for the future, I think that these powers will take on more and more importance and will have something to say.

The present chief economist of the World Bank is, for the first time, a Chinese and this is of the highest importance. If you recall, just in 2005 the Chinese companies wanted to buy an American oil company. The acquisition had been stopped by the USA Congress that has so set the national interest before the free market. Well, globalization does not work in this way.

It is not a one way direction. It should go on both directions.

In the old days, the United States feared the Japanese when they were buying everything. Now, it is China's turn and is following the Japanese path. China will say more and more its opinion, will become more important because has an important economy and maybe, one day, we shall use yuan as reference currency instead of dollars. Lately, I have been

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Interview

According to president Khelil, there will be a gradual decline in oil demand over time and we'll talk more of a "peak in demand" than "peak oil"

asked - referring to Opec - what I think about using dollars.

My reply was that sooner or later it will be necessary to use the currency of the most powerful country, of the greater political and economic power. It works in this way. The U.K. has in the past imposed the use of pound as it was a great political power, now it is the USA's turn and then maybe it will be China's or Russia's or some other nation. These powers have interdependent economies and policies, and I do not see any conflicts, personally. I think that this exchange of technologies will be positive for the whole world as China could contribute to make technology available to more people.

China could, for example, play an important and positive role in Africa. A role the neither America nor Europe have been able to play. Infrastructures could be built, accomplish all what the Africans cannot accomplish receiving gas and oil in return. Europe and America could have done it, too and receive these goods as payback, but they didn't do it. On the contrary, China is already building infrastructures, roads necessary to these countries - dams and houses. This will help, at least, to raise the quality of life in our continent.

Other countries could play an important role, not only China.

Once infrastructures have been built and there is availability of means and money, USA and Europe could again do businesses with countries of different geographical areas, now not reached by China.

President, what do you think in general of the petroleum-sustainability combination, where sustainability refers to the set of relationships among

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human activities and their dynamics. Relationships with the purpose to allow continuity of mankind, satisfaction of the needs of the individual and development of human cultures.

I think that nowadays, enterprises cannot do business without taking these issues into account . Each company has what can be defined as an environment, safety and health department.

These are crucial topics, acknowledged by all companies that approach them in their own way, by their own abilities and awareness. Our Company, which is a state-owned company like Eni, I believe, has always been very attentive to these issues. A state-owned company's task is to protect the interests of the Country and of its people: Sonatrach, the Algerian state-owned company has many projects for the communities in which it operates. There is a department for social investments, and we do a lot with regards to energy, health, education. In Algeria, a lot has been done as for culture, scientific reports, history, film making and film industry, as well as for young people. We think that these are indispensable matters. We take care of the protection of environmentally and historically important sites. For example, we have set up a foundation with the sole purpose to safeguard culture and protect the flora and fauna of this very delicate area. Finally, we are doing a lot, not only for people, for culture but also to preserve the music heritage of the country.

There is an instrument in Algeria with only one person able to play it now. We have then established a school where to teach girls to play it so this historical heritage does not get lost.

If it gets lost, history gets lost. Finally,-and obviously- we do

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International companies have to cooperate more closely with domestic oil companies because international companies own more technology, management and knowledge than domestic ones, but lack resources.

Therefore, by combining these two things, the best results should be attained

a lot for the environment by planting trees. There are plans covering this issue, i.e. the environment protection. In addition, to this end, through the education system, we bring awareness to the young people with regards to it.

Algeria is a manufacturing country and is now aiming to enter the distribution market. From this point of view, is the relationship with Italy fundamental? In addition, what are you expecting from Italy as facilitating agent? What does Italy represent for you?

As I said earlier, we are a global market, generally speaking.

This means that there are difficulties but opportunities, too.

We have seen that Sonatrach had the chance to enter other countries' market not only as a simple oil and gas supplier.

We have identified the areas where we could become more competitive. As for gas, we have tried to be, in some cases, co-owners of some terminals and not only their suppliers: for this reason we have a partnership in the U.K. We have also created companies connected to gas marketing as the latter is a sector which we are good at. We have established a marketing company and not a distributing one, in Italy and Spain. We are not interested in distributing gas. There are companies that can do it better than us. As far as I know, there are over one thousand distribution companies in Italy, and we cannot compete with them. In Italy, the supply of a cluster of companies is a sector in which we can compete.

This is what we are doing and what we are interested in. We feel that if we can move "downstream", others can move "upstream".

Opec, 11 states possess 80% of crude oil pec is the acronym of “Organization of the Petroleum Exporting Countries�. Founded during the Conference of Bagdad in September 1960, initially it was made up of 5 countries (Iran, Iraq, Kuwait, Saudi Arabia and Venezuela), but later the number increased to 11 as Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates(1967), Algeria (1969) and Nigeria (1971) also joined.

Altogether they cover about 40% of world oil production and 14% of natural gas. In their subsoil there are about 80% of the planetary oil reserves, a quarter of which held by Saudi Arabia alone. Opec is an international organization whose member states get their main source of economic revenue from oil. For this reason it controls and limits oil production in its member countries.

The objective of the organization is to achieve stability on the oil market by regulating the levels of production in member states thus helping to maintain a balance between supply and demand. Although oil production in Opec countries is less than half that of the rest of the world, in reality its percentage rises to 60% in terms of oil traded on world markets.

This is because a large proportion of oil production extracted by countries not belonging to Opec is destined for internal use. Therefore, by exercising their choice to produce more or less oil the Opec countries can influence the price of crude oil all over the world. However, we should not lose sight of the fact that the price of oil is one thing, but the price of petroleum products, such as petrol, is another. In this latter case the costs of transport, refining and distribution play a major role, not to mention the heaviest factor of all, taxation.

When Opec was founded hardly anyone noticed. In fact, in 1960 the supply of low-cost oil was plentiful on a market controlled by the large western oil companies.

During the seventies, initiatives undertaken by Opec aimed almost exclusively at defending prices and therefore contrasting the power wielded by these large international oil companies. At first, however, the attempt to elaborate a common policy between member states had scarce results and even agreed production quotas were often violated. At the onset of the seventies, the international demand for crude oil exploded and Opec suddenly found itself in a position of advantage with respect to the oil companies. In 1973, it succeeded in imposing a big increase in the price of crude oil which passed from 3 to more than 11 dollars a barrel.

Furthermore, between 1971 and 1972 some producing countries (Algeria, Iraq, Libya) nationalized their oil industries while still others instituted greater control over oil companies. A further increase in the price of oil came about after the Yom Kippur war when the Arab members of Opec imposed an embargo on countries supporting Israel in the conflict.

Between 1975 and 1979 international demand for oil regained momentum and prices achieved a relative stability. However, this situation was interrupted by the Islamic revolution in Iran which resulted in a further rise in the price of crude oil. The price reached 32 dollars a barrel and provoked widespread recession in industrialized countries.

The situation worsened at the beginning of the eighties after the outbreak of war between Iran and Iraq, when a further increase in the price of crude oil (which rose to 42 dollars a barrel) provoked a violent war in prices, both among member countries of Opec and other oil producing countries with the object of obtaining a greater market share.

In the following years, the fear of a rapid depletion in crude oil reserves encouraged Opec, with scarce results, to adopt a policy aimed at regulating extraction and stabilizing the price of crude oil which, as a result of the economic crisis in industrialized countries, the energy policies adopted by the same and by the discovery of new oil fields, had suffered a downward trend to around 10 dollars a barrel.

Towards the end of the eighties, just after the Iran-Iraq war, Opec managed to achieve a relative internal cohesion and agreement with other oil producing countries to avoid a further drop in the price of crude oil. However, the Gulf war put into discussion once more the agreement reached with much difficulty.

In the emerging political and economic situations and their relative equilibrium the organization has an important role to play.

O

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OPEC AND WORLD OIL SUPPLY 87.0

32.5

The demand for oil is a concern for us since it is closely related to the world economy growth rate.

Consequently oil demand will decrease in a situation of economic slump

86.5

World supply (RHS)

Opec crude production (LHS) 32.0

86.0

85.5

31.5

85.0 31.0 84.5

84.0

30.5

83.5 30.0 83.0 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2006 2007 2008 Total Opec crude oil production averaged 32.01 mb/d in March, a decline of 141 tb/d from the previous month according to secondary sources. Opec production (not including Iraq) averaged 29.56 mb/d, down 174 tb/d from the previous month.

Production in Indonesia, Iraq and Iran witnessed some gains, while all other members saw declines. In the first quarter, Opec production averaged 32.06 mb/d.

OPEC CRUDE OIL PRODUCTION

2006

2007

3Q 07

4Q 07

1Q 08

Jan 08

Feb 08 Mar 08

mar/feb

Algeria

1,365

1,360

1,365

1,388

1,400

1,410

1,403

1,396

-7.1

Angola

1,385

1,662

1,678

1,783

1,878

1,859

1,898

1,881

-16.3

Ecuador

536

506

508

508

501

503

502

496

-5.4

Indonesia

895

844

836

841

864

843

868

881

12.9

Iran, IR.

3,845

3,851

3,859

3,898

3,933

3,902

3,878

3,963

84.2

Iraq

1,932

2,089

2,107

2,333

2,313

2,202

2,357

2,390

33.2

Kuwait

2,520

2,465

2,467

2,513

2,537

2,557

2,547

2,511

-35.5

Libya, APA.J.

1,702

1,710

1,718

1,742

1,748

1,743

1,751

1,743

-8.3

Nigeria

2,235

2,126

2,154

2,162

2,047

2,076

2,068

2,023

-5.5

821

807

814

827

839

826

839

835

-3.7

Saudi Arabia

9,112

8,651

8,584

8,909

9,052

9,083

9,055

9,025

-30.1

UAE

2,540

2,504

2,575

2,429

2,578

2,592

2,596

2,534

-62.1

Venezuela

2,539

2,392

2,377

2,395

2,374

2,397

2,390

2,333

-57.4

Totale Opec

31,428

30,968

31,043

31,728

32,062

31,993

32,151

32,010

-141.2

Opec (excl. Iraq)

29,496

28,879

28,936

29,395

29,750

29,791

29,794

29,620

-174.3

Qatar

Preliminary figures for March indicate that world oil supply averaged 87.02 mb/d. This represents a gain of 0.16 mb/d over the previous month, with Opec’s crude share at around 36.8%. The estimate is based on preliminary data for non-Opec supply, estimates for Opec NGLs and Opec crude production from secondary sources.

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Interview

Economy, in America, is now entering a new negative cycle mainly as a result of the high cost of oil.

Economists have discordant views. I believe that the American economy has entered a slump period. In the next weeks, once data have arrived, we will know it for sure. Our concern, though, is to understand which will be the outcome on the world economy of an eventual recession. We have not yet seen the impact up to its extreme consequences that the sub prime loans crisis will have on many banks. Many analysts agree that it will be necessary to wait one year before being able to realize how deep this crisis is and what impact it will have, not only on the economy of America but on the whole world. Of course, the demand for oil is a concern for us since - as you know - it is closely related to the world economy growth rate. Consequently, broadly speaking, oil demand will decrease in a situation of economic slump. I believe that an important role will be played, in this connection, by the Chinese economy depending on it being struck by recession or not. Some economists do not agree because they are convinced that the Chinese Gross Domestic Product relies more on the domestic market trend rather than export.

In this case, considering that most of the oil demand comes from China, an eventual recession in the USA would not greatly influence the world demand of oil. This is, in my opinion, the most likely scenario but there will be, for sure, quarterly periods of highs and lows in the demand.

In the meeting at Cairo the topic has been again on an Opec for gas. What do you think?

In 2001, we established the Forum of Gas Exporting and Manufacturing Countries at Tehran, Iran. The second meeting took place here in Algeri. The forum aim was to exchange ideas and information and try to understand how to cooperate to save money, by means of more efficient transportation. This was the idea. Just before the opening of the meeting at Doha - last year I believe - president Putin said that a gas Opec could be of interest. The Emir of Qatar, our President, and three Ministers basically said the same thing: it is quite difficult to understand how such an organization

could work. Actually, once the gas has been sold, it is not possible to increase or decrease the volumes. Moreover, the price of gas is linked to the price of oil and there is already an organization-Opec- which is indirectly taking care - in some way - of the gas price pegging. An additional one would be of no use. This is what our Ministry said, but the meeting of Doha has contributed to the formation of work groups for study on how to improve coordination within the Exporting and manufacturing Countries Forum and to fix a meeting at Moscow as soon as the results of such a study are available.

This meeting should take place some time this year (the date has not been fixed yet), perhaps July or November.

Practically you envisage a coordination, a synergy?

A synergy or coordination already exists in terms of information exchange. There is cooperation among companies: between Shell and Sonatrach or between Eni and Sonatrach for such projects, like the one in Mali, for example.

Agreements have been already made with Shell, Statoil and Gazprom. However, as regards Gazprom, we only have papers at the moment, no prospecting nor production activities.

Could you forecast which will be the big powers of oil extraction?

For oil? Sonatrach! I am sure that the international oil companies have some advantages. It is obvious that companies like Gazprom will play an important role. Oil companies like CNPC, Chinese, Petrol China, already play an important role, and others like Petrobras - state-owned companies, you know, are going to play it soon . We are in a prominent position; Saudi Aramco, which is becoming an international company, will reach us soon. Of course, Sonatrach is striving for an important role and is becoming international. International companies have to cooperate more closely with domestic oil companiesas Eni is doing - because international companies own more technology, management and knowledge than domestic ones, but lack resources. Therefore, by combining these two things, the best results should be attained.

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Thomas L. Friedman illustrates the “First Law of Petropolitics”

The dutch disease There is a close relationship between profits from the price of oil and levels of democracy. The lower the price of crude oil, the more the oil countries move towards transparent political systems he price of oil and the freedom of a people always move in opposite directions. It is the first rule of ‘Petropolitics’, the politics of oil, and could be the axiom for explaining our era.

by THOMAS When I happened to hear president L. FRIEDMAN Ahmadinejad of Iran say that the Holocaust was a ‘myth’, I couldn’t help asking myself if he would have said it if the price of oil had been 20 dollars a barrel instead of 60. And when I heard president Chavez of Venezuela tell the British prime minister Tony Blair to “go to hell”, and shout at his own supporters that the United States, supporters of free commerce in the American area, “could go to hell”, I couldn’t help asking myself if Chavez would have said the same thing if the price of oil had been 20 dollars a barrel instead of 60, and his country would have had to support itself by giving private entrepreneurs an opportunity rather than digging oil wells.

Following events in the Persian Gulf in recent years, I’ve noticed that the first state in the Gulf to hold regular, free elections, also open to women, the first Arab state to initiate a full review of employment law to support employment of its inhabitants and reduce dependency on foreign manpower, has been Bahrain. By chance Bahrain is also the first Arab state to deplete its oil reserves. I couldn’t help asking myself if all this was a coincidence.

Finally, when I saw the democratic activists in Lebanon ward off the Syrian troops from their borders I asked myself if it was by chance that the first, and only, democracy in the Arab world didn’t have a drop of oil.

T

An experiment: try to express, graphically, the relationship between the price of oil and rate of development, economic reforms, respect for civil rights.

The more I thought about these issues, the more it seemed clearer that

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there had to be a correlation between the price of oil and the rate of development, economic reforms, and the respect of civil rights in certain countries. This led to an experiment to try and quantify this relationship graphically, by showing the global average for crude oil price on one axis, and the level of expansion or contraction of the economic and political freedom of a country on the other. This was done using the same indicators as a research company such as Freedom House, i.e. number of free and impartial elections, the number of newspapers which start up or are forced to close, the number of arbitrary arrests, the number of reform supporters elected to parliament and the number of economic reforms interrupted or blocked, the number of privatised or nationalised industries etc.

I will be the first to acknowledge that we’re not dealing with a scientific experiment, because the growth and decline of economic and political freedom in a society can never be objectively quantified. It is a fact, however, that, although there are many inaccuracies, the graphics show a strong relationship between the price of oil and the growth of freedom, such significant growth that I would like to ignite the debate by announcing the ‘First Law of Petropolitics’.

This First Law of Petropolitics is as follows: in the rich oil states the price of crude oil and the development of freedom are always moving in opposite directions. According to the First Law of Petropolitics, the more the global average of crude oil prices increase, the more that freedom of speech, freedom of press, regular elections, independent judiciary system, the role of law, and independence of political parties erode. The higher the price of oil, the more that the leaders of the producing countries become indifferent to what the world says and thinks about them.

Inversely, according to the First Law of Petropolitics, the lower the price of oil, the more that oil countries move towards transparent political and social systems, the more sensitive they are to the voice of the opposition, and more disposed the become to creating legal and educational esta-

Winner of three Pulitzer Prizes for his correspondence from Lebanon and Israel for the New York Times, Thomas Friedman has worked in the field of economics and foreign affairs all his life, acquiring a wealth of knowledge on countries in the Middle East, and passionately studying phenomena which have spanned the world economy over the years.

Friedman was born in Minneapolis on 20th July 1953.

In 1975 he graduated with distinction at the University of Brandeis, with a thesis on Mediterranean Studies, then studied for a Masters’ degree on the Middle East at Oxford. Immediately after he started in the London office of United Press International (UPI), where he worked as a correspondent from Beirut from June 1979 to May 1981, the year when he was taken on by the New York Times and was called to New York. The journalist stayed in the USA for a year, and dealt with finance, specialising in the countries of Opec, and more generally, on topics relating to oil. In April 1982 he was in Beirut again as correspondent of the Times. Six weeks later Israel invaded Lebanon. In June 1984, Friedman was transferred from Beirut to Jerusalem, where he stayed until 1988, when the Guggenheim Foundation Fellowship commissioned him to write a book on his reflections on the Middle East.

In June 1989, he published From Beirut to Jerusalem, which remained on the New York Times bestseller list for almost twelve months, and was published in 10 different languages, including Japanese and Chinese. In 1989 he received a new role in Washington as the Times’ head diplomatic correspondent; for the next four years Friedman travelled far and wide, covering more than 500,000 miles and recounting the end of the Cold War. He then went back to work in domestic politics as head correspondent in the White House and again in foreign affairs, as a columnist for the New York Times.

In 1999 his second book was published, The Lexus and the Olive Tree: Understanding Globalisation, an attempt at understanding the phenomena of globalisation from the point of view of farmers in the Amazon and young managers in Silicon Valley. Following on were Longitudes and Attitudes: The World in the Age of Terrorism (2002) and The World is Flat: A Brief History of the 21st Century (2005), in which the author returns to the topic of globalisation, providing a snapshot of a planet in which distances are no longer relevant, where it makes no difference where you are because the world has become completely transparent, accessible, practicable; it has become flat

blishments which favour people’s capability, men and women, to compete, create new companies, and attract investment from abroad. The more the price of oil decreases, the more producing countries become sensitive to what the rest of the world thinks of them.

It is especially worth noting the connection between the price of oil and the development of freedom today, in the face of that which seems like structural global growth of the price

of crude oil, which could have a negative effect on world structures in the post-Cold War period which we have known until now. In other words, the price of crude oil should now be a daily worry, not just for the treasury minister, but also for the secretary of state.

In this analysis I mean oil countries which not only depend on oil production for the bulk of their exports and gross domestic product, but which also have weak state institu-

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tions and completely authoritarian governments. At the top of this list are Azerbaijan, Angola, Chad, Egypt, Equatorial Guinea, Iran, Kazakhstan, Nigeria, Russia, Saudi Arabia, Sudan, Uzbekistan and Venezuela. (Countries which have a large quantity of crude oil but which are well consolidated, with solid democratic and economic institutions already established before the oil was discovered - for example Great Britain, Norway and the United States are not subject to the First Law of Petropolitics).

Economists have been highlighting for some time now the negative impact that the abundance of natural resources can have on the economy and politics of a country.

They have called it ‘the Dutch disease’ or ‘the resource disease’. It develops in the course of de-industrialisation which can arise from the sudden, fortunate discovery of a natural resource. This is what it was called in Holland in the sixties after the discovery of the enormous natural gas reservoirs. In countries with the ‘Dutch disease’, the value of money increases, thanks to the unexpected influx of cash from oil, gold, gas, diamonds, or other natural resources. This ensures that exports are not competitive while imports are very cheap. Cash-rich citizens start to import like crazy - internal industry is dismantled and de-industrialisation is quickly reached. The ‘resource disease’ not only hits at an economic level, but also influen-

A sudden discovery of important natural resources can result in deindustrialisation and heavily influence the politics and society in a country ces the politics of a country, investments and educational priorities.

Everything revolves around the flow of oil and who can benefit from it, and how much – not around competition, innovation and production in the real market.

Some political scientists have studied how much an abundance, especially of oil, can affect the democratic system. One of the most significant analytical studies on the matter is that of Michael L. Ross, of the UCLA. By analysing the statistics relating to 113 countries between 1971 and 1997, Ross concluded that “the reliability of a country on oil or other minerals destined for export tends to make it less democratic.

This phenomena is not caused by other types of export; furthermore it is not only limited to Arab states, the Middle East, or to sub-Saharan Africa, or small countries”.

Particularly interesting in Ross’s analysis is the indication of specific me-

chanisms through which excessive wealth from oil affects democracy. In the first place, states Ross, there is the ‘taxation effect’; governments in the oil-rich countries tend to alleviate the social pressures which would otherwise lead to greater responsibility for those governing, and the citizens’ requirement for more representation by citizens. Put another way: if the motto of the American Revolution was ‘no tax without representation’, the motto of oil authoritarianism is ‘no representation without tax’. The regimes sustained by oil, which do not need the people’s consent to survive simply because they can drill another oil well, do not need to listen to their citizens or those who represent them either.

The second mechanism through which oil affects democracy, argues Ross, is the ‘spending effect’. Wealth from oil encourages the increase of spending on welfare which in exchange attenuates pressure towards democratisation. The third mechanism which Ross cites is ‘the effect of group formation’. When oil ensures unexpected income for an authoritarian state, the government can use it to prevent the formation of independent social groups – groups which would be more inclined to demand political rights. Furthermore, again according to Ross, an excessive amount of income from oil can cause a ‘repression effect’ because it allows governments to spend a lot on police, national security, and secret services, which can be used to squash democratic movements. Finally, Ross identifies a ‘modernisation effect’. A

massive influx of wealth from oil can decrease social pressure for types of employment specialisation, urbanisation, and for higher levels of education; conditions which normally accompany greater economic development and determine more divided public opinion, more ability in self-organisation, in doing business and communicating, and self-provision of centres of power.

After 11th September the price of oil went from 20-40 dollars per barrel to 40-60 dollars. This jump in price was partly due to insecurity in the global oil market caused by waves of violence in Iraq, Nigeria, Indonesia and Sudan; but it seemed even more likely to be as a consequence of that which I term as the ‘flattening’ of the world and the unprepared entry onto the market of 3 billion new consumers, from China, Brazil, India and the ex-Soviet empire, who all wanted a house, a car, a microwave and a refrigerator. The appetites of these people and their energy requirements are enormous.

This is already, and will continue to be, a constant cause of pressure on the price of oil. Without drastic saving plans in the West, or the discovery of an alternative to fossil fuels, we are destined to move towards an increase in the near future.

With oil wealth increases, leaders of authoritarian regimes have increasing amounts of money to spend on repressing opposition, buying approval, and ignoring international pressure.

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Feature Politically this will mean that a whole group of oil countries with weak institutions or with completely authoritarian governments will probably see a reduction in freedom and an increase in corruption and authoritarianism. The leaders of these countries can plan on having significant increases in available income for strengthening security forces, bribing the opposition, buying votes or public approval, and ignoring international regulations and conventions. It is sufficient to read the newspapers any day to see the evidence.

As an example consider an article in the Wall Street Journal in February 2005, on how the Mullahs of Teheran (who are now loaded with money thanks to such high oil prices) are turning their backs on foreign investors, instead of encouraging them.

Turkcell, a Turkish mobile phone operator, signed an agreement with Teheran to construct the first private telephone network in Iran. An attractive agreement - Turkcell agreed to pay Iran 300 million dollars for the licence and to invest 2 billion and 250 million dollars in the enterprise, creating 20 thousand jobs. However, the parliamentary Mullahs froze the contract, maintaining that it could encourage espionage against Iran.

Ali Ansari, an expert in Iranian issues at St. Andrew’s University in Scotland, commented that Iranian analysts have been discussing economic reforms for ten years, but “now the situation has deteriorated significantly”, continuing that “now they have all this money for the high oil prices and they don’t have any need to reform the economy”.

True with regards to Iran is a comment published by the Economist: “nationalism is easier on a full stomach and Mr. Ahmadinejad is the only President who will be lucky enough to collect 36 billion dollars next year from oil exports, in order to buy loyalty. The government has promised to build 300 thousand houses, two thirds of which will be outside the large cities, and to keep the energy subsidies which amount to an exorbitant 10 percent of the gross domestic product”.

Or consider the drama which is taking place in Nigeria. There it is stipulated that the President will have a four-year mandate which can only be repeated once. President Olusegun Obasanjo won power in 1999 after a period with a military government, and was elected by popular vote in 2003. When he seized power from the Generals in 1999, Obasanjo made news by investigating the violation of human rights by the Nigerian military, releasing political prisoners, and even trying to make a real attempt at eradicating corruption. This was happening when oil was 25 dollars a barrel. Today, with oil at 60 dollars a barrel, Obasanjo is trying to persuade the Nigerian Parliament to change the constitution to allow him a third mandate. A leader of the Nigerian opposition, Wunmi Bewaji, stated that they were

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offered million dollar wads of money to vote for the extension of Obasanjo’s mandate. Clement Nwankwo, one of the most committed supporters of human rights, said that since the price of oil started to rise, “civil liberties have seen a significant decline – people have been subjected to random arrest, opponents have been killed, and democratic institutions quashed”. Oil accounts for 90% of Nigeria’s exports, added Nwankwo, and this partly explains why there was a sudden increase in the kidnapping of foreign oil employees in the wealthy oil area in the Niger delta. The fact is that many Nigerians think they have been robbed of the oil, because only a small amount of the proceeds benefit Nigerians.

In oil states it is often the case that politics revolve around those who control the wells, but public opinion is acquiring a distorted concept of the idea of what constitutes ‘development’. If the population is poor and the leaders are rich, it is not because the country has failed in promoting education, innovation, the role of law, and business relationships. “If Nigeria didn’t have oil, the entire political equation would be different”, stated Nwankwo; “income would not be from oil and there would be a problem of economic diversification to be faced by private companies, and people would develop their own creativity”.

In actual fact, the relationship between the price of oil and the increase in freedom in some countries is so close that any political class could be distracted from the path of reform by a hike in the price of crude oil. Look at Bahrain, which knows that oil stocks are being depleted and has become a case study on how the fall in income from oil can spur reforms. Not even this country was capable of resisting the temptation to raise the price of oil. “We are seeing an opportune moment now thanks to the price of oil, and this can make the authorities feel more secure”, stated Jasim Husain Ali recently, who is the head of the department for economic research at the University of Bahrain. “However, this is a dangerous trend because income from oil is not sustainable. Diversification in Bahrain could be sufficient with respect to Gulf standards, but not with respect to international standards”. It is not surprising that a young Iranian journalist once said to me whilst walking through Teheran, “If only we didn’t have oil we could be like Japan”.

Low oil prices at the end of the eighties led to the collapse of Communism, even more so than Reagan policies. But things have changed even in Russia.

With all due respect for Ronald Reagan, I don’t believe the collapse of the Soviet Union was completely down to him. Obviously there were many causes, but the global fall in the price of oil at the end of the ei-

With high prices that risk becoming irreversible, unreliable regimes will increasingly have greater means for altering international structures ghties and early nineties certainly had a key role. (When the Soviet Union officially dissolved in 1991, the price of oil per barrel was around 17 dollars). And the low oil prices certainly helped to guide the post-Communist government of Boris Yeltsin towards greater respect for law, more transparency to the outside world, and greater care of legal establishments, as was required by global investors. Then came the Russian president, Vladimir Putin.

Think of the difference in Putin when oil was 20-40 dollars a barrel and now when it is 40-60. In the first case we had that which I call ‘Putin version 1’. President Bush stated after their first meeting in 2001 that he had looked into the soul of a man and realised he could trust him. If Bush looked into the soul of Putin today, Putin version 2, with 60 dollars a barrel, he would see a very black soul, black as oil. He would see how Putin has used his unexpected fortune from oil to swallow (nationalise) the enormous Russian oil company Gazprom, various newspapers and television networks, and many types of other Russian companies and institutions which were previously independent.

In the period of the lowest oil prices in the early nineties, even the Arab oil countries such as Kuwait, Saudi Arabia and Egypt at least spoke about economic reforms or small steps towards political reform. But as soon as prices started to rise, the entire reform process was halted, especially in terms of politics. he constant growth of wealth from oil could really distort the entire international system and the nature of the world itself in the post-Cold War period.

When the Berlin Wall came down there was a general faith in an unstoppable wave of free markets and democratisation.

The proliferation of free elections in the following decade made that wave more concrete, but now we are seeing an unexpected counter-wave of oil-authoritarianism, made possible by oil at 60 dollars a barrel. All of a sudden, regimes such as those in Iran, Nigeria, Russia, and Venezuela, are backtracking with regards to that which seemed an inevitable process of democratisation, with elected au-

T

tocrats that use the new wealth from oil to ensure power, buy the opposition and supporters, and extend state power into the private sector, just when many thought that finally they were loosening their grip. The unstoppable wave of democratisation which came after the fall of the Berlin Wall seems to have found retaliation in the black seas of petro-authoritarianism.

Even though petro-authoritarianism doesn’t represent the wide spectrum strategy and economic threat which Communism meant for the West, in the long term it could however corrode world stability. It is not only some of the worst regimes in the world which will have extra money for longer than ever to make things worse, but respectable, democratic countries, like India and Japan, will be forced to kowtow or close their eyes to the behaviour of petro-authorities such as Iran or Sudan, because of the heavy dependence on oil. This can’t be a good thing for world stability.

Any democratic defence strategy will be destined to fail without credible, sustainable initiatives for knocking down oil prices.

Let me confirm that I know the relationships suggested by these graphs are not perfect and, without a doubt, there are exceptions which the reader could certainly highlight. However, I am convinced that the graphs show a general trend which is confirmed in the news every day: the increase in the cost of oil clearly has a negative impact on the path to freedom in many countries, and when there are enough countries and enough negative impact, world politics starts to become poisoned.

Even if we can’t influence the oil supplies of any country we can affect the price of oil by changing the quantity and type of energy which we use.

When I say “we” I mean the United States to some degree, which consumes about 25 percent of the world’s energy, and the oil importer countries in general. Thinking about how to change our models of energy consumption to push oil prices down is not a hobby for enlightened environmentalists any more, or for behaving virtuously on a personal level. Now it is imperative for national security.

Consequently, any democratic defence strategy in America which doesn’t include a credible, sustainable strategy for finding alternatives to oil, and to knocking down the price of crude oil, is totally senseless and destined to fail. Today it doesn’t matter what position you have in foreign politics; you cannot be either an effective realist in foreign politics, or an effective idealist in the defence of democracy, without also being an effective energy environmentalist.

Reprinted with permission from Foreign Policy mag/giu 2006. www.foreignpolicy.com © (issue year) by the Foreign Policy.

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Peak oil

For how much longer? face to face

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face to face

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Towards a world w ne thing is certain: oil does not reproduce, and sooner or later it will run out. And sooner or later the oil extracted worldwide will not be enough to satisfy the needs of all humanity, needs that in the meantime are continuously growing. It will be the moment of the peak oil: the maximum rate of oil production. Since we depend on oil for everything, if we reach that deadline unprepared the repercussions due to oil shortage will be dramatic from both an economical and socio-political point of view.

Up to this point, everyone agrees. But concerning when the peak will arrive, and how and when the predictable consequences will be faced,

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specialists appear to be quite divided. The catastrophists who speak of immediate risk are contrasted by more optimistic experts who believe the problem is many years away. In between, others who think there is still a margin of time, but who feel there is nonetheless an urgency to implement the technological and social changes necessary to strongly reduce our dependency on oil.

A crucial and distressing problem for life on earth; a problem we cannot avoid, but that instead is minimized by public opinion, perhaps due to the continuous false alarms of the past years. “Oil” has faced this problem from its very first issue with the typical attitude that strongly characterises our magazine: a commitment to objective information, with the

ambition of awakening public opinion, and stimulating the managerial class that is responsible for making decisions. We did it allowing some of the field’s most qualified international experts to illustrate their opinions.

The starting point for this broad discussion was the thesis expressed by Robert Hirsch, considered one of the most accredited experts in the field of energy problems, and designated by the U.S. Department of State to guide the group of experts that have edited the report “Peaking of word oil production: impacts, mitigation, and risk management”. This document, widely publicised at the time of its publication and absolutely still relevant, was adopted as our main reference for presenting the various aspects of the ”peak

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Peak oil

face to face

d without oil? oil” topic. In the article we are considering, written after the circulation of the Report, Hirsch sounds the alarm: it’s impossible to predict when the peak will arrive, but the signals regarding the world oil production trend are not encouraging, to the extent (says Hirsch) that oil peaking may take us by surprise even today. It is therefore urgent to launch a radical energy consumption reform, since at least twenty years are required for it to be fully effective.

This point of view was followed by the opposing opinions of other great participants of a debate that has been going on for years.

Vijay V. Vaitheeswaran, correspondent for the Economist for Energy and the Environment, in an article published in 2005 – right after

the report from Hirsch – holds a much more reassuring proposition of the future of oil production. For his part, Leonardo Maugeri, strategy and development manager in Eni, warns us against hurried disastrous predictions, and underlines instead the financial implications and political risks concerning oil production in this phase. Of great importance, as well, the voice of Chakib Khelil, who in addition to being Algerian oil minister is also president of Opec and exponent of the great producer countries.

Rather than an oil production peak, he feels we should fear a peak in demand: the moment in which the world will start to reduce the need for oil and move on to other types of energy resources.

The outlook of production and world oil markets may be

heavily influenced by the unknown factor regarding the explosive growth of some new actors of the international economical scene. The boom of countries such as China and India and their thirst for oil is already greatly influencing the oil market.

Federico Rampini, correspondent from Beijing for the daily paper La Repubblica and observer of Asian affairs, explains how those countries are facing the peak oil issue.

A vast panorama is therefore available: information, different points of view, comments. But no final answer: that’s not why we’re here. Instead, we want to help learn more about a vital issue for everyone, and perhaps to make a contribution to those responsible for making decisions. Quickly.

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The Hirsh report launches a warning: oil could run out…

face to face

In 10 or 20 years... maybe today It is impossible to predict when crude oil reserves will no longer be able to keep up with global demand. It could even happen immediately. Urgent, radical choices for rationalising consumption, especially with regards to transport he era of abundant low cost oil is coming to an end.

The good news is that there are new solutions ready to mitigate the impact. The bad news is, without timely measures, the damage to the world economy

by ROBERT will by severe and HIRSCH long-term.

Oil is the lifeblood of modern civilization. It fuels the vast majority of the world’s mechanized transportation equipment, and is a primary component of pharmaceutical, agricultural, and plastic products, as well as many others that are essential to modern life. The earth's generous endowment of oil has allowed economic growth for over a century, but this period of plenty is coming to an end.

This article describes the nature of the problem, the options for reducing impact, and the deadlines that need to be faced.

The exact moment of peak production is unknown; some think that it will happen soon, others believe that ten years or more are required. In any case, the date is almost irrelevant since the measures required to face the peak will definitely need more than ten years to be effective, given the world’s enormous oil consumption.

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The output of every oil reservoir rises immediately after discovery, reaches a peak and declines thereafter.

The same will happen on a world scale. And it might happen soon number one

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The logic of the world’s oil production peak follows the fact that the output of every oil reservoir rises immediately after discovery, reaches a peak and declines thereafter. Oil reservoirs have lifetimes typically measured in decades, and in normal circumstances peak production is often reached a decade or so after discovery. Peaking is a reservoir’s maximum oil production rate, which typically occurs after roughly half of the recoverable oil in a reservoir has been produced. In many ways, what is likely to happen on a world scale is similar to what happens to individual reservoirs, because world production is the sum total of production from many different reservoirs.

Because oil is usually found thousands of feet below the surface and because oil reservoirs normally do not have an obvious surface signature, oil is very difficult to find. Advancing technology has greatly improved the discovery process and reduced exploration failures. Nevertheless, oil reservoir discovery has been declining for over ten years.

“Reserves” is an estimate of the amount of oil in a reservoir that can be extracted at an assumed cost.

Thus, a higher oil price outlook often means that more oil can be produced, but geology places an upper limit on price-dependent reserves growth.

Reserves estimates are revised periodically as a reservoir is developed and new information provides a basis for refinement. Reserves estimation is a matter of gauging how much extractable oil resides in complex rock formations that exist typically one to three miles below the surface of the ground, using inherently limited information. Reserves

Oil production peaking “is a really frightening problem”. This is how Robert Hirsch recently commented on the issues concerning the peak of oil production. “This problem is unique in its difficulty”, continued the advisor, “and the more you reflect upon it, the further you analyse the numbers, the more it appears to be one of the most difficult to solve”. The reason, explained Hirsch, is that the issue presents “enormous risks for our economies and our civilisation”. Hirsch may be considered one of the leading experts on problems regarding oil peaking, having covered over the years numerous roles of prestige in the sector’s largest companies. After obtaining a Ph.D. in engineering and physics at the University of Illinois, he directed numerous technological programs in oil and natural gas exploration, oil refining, synthetic fuels, and defence technologies.

In the 1970s, he was part of the fusion energy program in the U.S. He founded the ARCO power technologies company and APTI, now owned by Bae System. He has served on numerous advisory committees related to energy development, and was the lead author of the report ‘Peaking of world oil production: impacts, mitigation and risk management’ (2005), written for the Unites States Department of Energy. He was recently an energy program advisor for the Science Application International Corporation (SAIC), and manager of the synthetic fuel research laboratory in Exxon. He holds 14 patents and has produced over 50 publications in the energy field. He is currently a Senior Energy Advisor at MISI (Management Information Services Inc).

According to the author of the report on oil production for the American government by 2025 oil requirements will have grown by 50% necessitating increasingly greater production, but – despite technological processes – there has been a decline in the discovery of new reserves over the last few decadesì

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Peak oil

According to predictions, world oil demand is expected to grow 50 percent by 2025 To meet that demand, ever-larger volumes of oil will have to be produced.

OIL CONSUMPTION EXCEEDS RESERVES ADDITIONS

40 Billions of barrels

20

0

-20 1940

2000

The difference between the annual additions of oil reserves and oil consumption. It has been clear for some years now that the discovery of new oil fields does not compensate for world consumption

Since oil production from individual reservoirs grows to a peak and then declines, new reservoirs must be continually discovered and brought into production to compensate for the depletion of older reservoirs, and satisfy new demand. If large quantities of new oil are not discovered and brought into production somewhere in the world, then world oil production will no longer satisfy demand. Peaking means that the rate of world oil production cannot

increase; it does not necessarily mean though that production will interrupt unexpectedly because there will still be large reserves remaining.

The peaking of world oil production has been a matter of discussion from the beginning of the modern oil era in the mid-eighteenth century. In the early days, little was known about petroleum geology, so predictions of peaking were no more than guesses without basis. Over

time, geological understanding improved dramatically and guessing gave way to more informed projections, although the knowledge base involves numerous uncertainties even today.

Some experts think that oil production peaking may be very close.

Others believe that we may still have over a decade of abundance, as is the opinion for example of Daniel Yergin of Cambridge Energy Research Associated.

21

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estimation is a bit like a blindfolded person trying to judge what the whole elephant looks like from touching it in just a few places. It is not like counting cars in a parking lot, where all the cars are in full view.

Specialists who estimate reserves use an array of methodologies and a great deal of judgment. Thus, different estimators might calculate different reserves from the same data.

Sometimes politics or self-interest influences reserves estimates, e.g., an oil reservoir owner may want a higher estimate in order to attract outside investment or to influence other producers.

Reserves and production should not be confused. Reserves estimates are but one factor in estimating future oil production from a given reservoir. Other factors include production history, understanding of local geology, available technology, oil prices, etc. An oil field can have large estimated reserves, but if the field is past its maximum production, the remaining reserves will be produced at a declining rate.

The decline may sometimes be slowed down, but the return to a production peak is impossible. This fundamental rule is often not fully understood by the those who are not familiar with oil production.

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Reaching the peak means that the level of production cannot increase but it doesn’t mean that production will suddenly run out There will still be ample reserves to draw on and new technologies to apply

Possible future oil demand 125

Billions of barrels/day Other

100

Japan

Western Europe

FSU

U.S.A.

China

Reference Projections, 2001-2025 (Percentage of average annual difference)

50

20

0

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I

World Oil Consumption, 1960-2025 Predicting energy consumption is made difficult by the many complex factors that influence supply and demand. We have applied the forecasts of future oil demand released by the US Energy Information Department (EIA).

The table summarises the EIA statistics for the 2001-2025 forecasts, comprising the 24-year projections per country or group of countries for oil consumption, GDP and population.

75

1960

n the last century oil consumption has been inexorably linked to population growth, industrial development and economic growth. Worldwide, this relationship are not expected to change in the immediate future. Even though the US consumes more oil than any other country – around 20MM b/day – it still accounts for just 26 percent of world production, compared to the 46 percent of world production that was consumed by the US in 1960. As the chart shows, Western Europe is currently the second biggest consumer (18%), followed

by Japan (7%), China (6%) and the FSU (5%), and the remaining 38% of consumption of production is divided between over 150 other countries

1970

1980

1990

2000

2010

2020

2025

U.S.A. Western Europe China FSU Japan Other World

Oil consumption 1.5 0.5 4.0 2.1 0.3 2.0 1.9

GDP (Con. $) 3.0 2.0 6.1 4.2 1.7 4.0 3.0

Population 0.8 0.1 0.5 -0.2 -0.1 1.3 1.0

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Peak oil

Eni - World Oil&gas Review

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A growth of 4% per year is projected for oil consumption in China, and projections indicate that in 2025 China will be the world’s second biggest consumer of oil, absorbing 11% of world consumption. Second place in the speed of growth in consumption is held by the FSU countries, with an average increase in consumption of over 2% per year.

For the remaining big consumers, including the US, Western Europe and Japan, in the 24 year period a growth in consumption is predicted that is less than or equal to the world average. In the US it is predicted that oil consumption will increase at a rate of 1.5% per year, and that by 2025 US oil consumption of the world’s oil will have fallen to 23% (29.7 MM b/day), while the Western European share will fall to 13% (14.4 MM b/day). And the growth share of oil consumption of the many countries included in the “Other” group, including India, Mexico and Brazil, is forecast at between 10 and 30% over the world average. By 2025 this group will represent 43% of consumption of the world’s oil.

In other words, in the EIA reference case, the world oil consumption of 80 MM b/day in 2003 is forecast to increase to 121 MM b/day by 2025, with the biggest growth in countries other than the US, Japan or Western Europe. Annual world demand for oil for that period is estimated at 1.9%.

mists therefore expect that higher oil prices and improved technologies will continue to provide ever-increasing oil production for the foreseeable future. To gain some insight into the effects of higher oil prices and improved technology on oil production, let us briefly examine related impacts in the lower 48 US states. This was one of the world’s richest, most geologically varied, and most productive up until 1970, when production peaked and started to decline. The figure shows oil production compared with prices and technology. In constant dollars, oil prices increased by roughly a factor of three in 1973-74 and another factor of two in 1979-80.

OIL PRODUCTION - THE FIRST TWENTY COUNTRIES IN THE WORLD

Ira n

In the past, higher prices led to increased estimates of conventional oil reserves worldwide. However,

sults have been disappointing for decades. If recent trends hold, there is little reason to expect an increase in the discovery of new reservoirs .

Another fact to keep in mind is that oil production is declining in 33 of the 48 major producing countries.

Exploration for and production of petroleum has been an increasingly more technological enterprise, benefiting from more sophisticated engineering capabilities, advanced geological understanding, improved instrumentation, greatly expanded computing power, more durable materials, etc. Today’s technology allows oil reservoirs to be more readily discovered and better assessed sooner than before. Some econo-

face to face

Oil production is declining in 33 of the 48 major producing countries. And there is little reason to expect an increase in the discovery of new reservoirs

this price-reserves relationship has its limits, because oil is found in discrete packages (reservoirs) as opposed to the varying concentrations characteristic of many minerals.

Thus, at some price, world reserves of recoverable conventional oil will reach a maximum because of geological fundamentals. Beyond that point, insufficient additional conventional oil will be recoverable at any realistic price. This is a geological fact that is often misunderstood by people accustomed to dealing with hard minerals, whose geology is fundamentally different.

Oil companies and governments have conducted extensive exploration all over the world, but their re-

Ru

Recently Opec has reassured the world that oil supplies will continue in great quantity, but even this position is slowly changing. For example, some Opec countries are starting to observe that the reserves will not be sufficient to satisfy world needs ten to fifteen years from now.

These assertions correspond to the questions raised, regarding Saudi Arabian reserves, by Matthew Simmons in his book “How reliable are Saudi production and reserve estimates?”

Oil is classified as “Conventional” and “Unconventional.” Conventional oil is typically the highest quality, lightest oil, which is extracted with comparative ease and costs less to produce. Unconventional oils are heavy, often tar-like. They are not readily recovered since production typically requires a great deal of capital investment and supplemental energy in various forms. For that reason, most current world oil production is conventional oil.

976

0 24.6 8.7 5.8 3.2 3.2 2.9 2.7 2.7 2.6 National percentage of total world production

2.6

2.4

2.3

2.1

2.1

1.9

1.9

1.4

1.4

1.2

1.1

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Pagina 24

UNITED STATES: HIGH PRICES ARE NOT DRIVING PRODUCTION 3.5

Billions of barrels/years

3.0

Production

dollars per barrel 70

2.5

60

2.0

50 1.5

40

1.0

30

Price

20 0.5

10

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0

1950

1960

1970

1980

1990

0

A comparison between the annual variations of oil prices and oil production in the U.S Lower 48 states. Price increase (tripled in 1973-74 and doubled in 1979-80) is in no way followed by a production increase. In light of this finding, there is no reason to expect that a different situation will exist worldwide.

GREAT BRITAIN: A COLLAPSE AFTER THE PEAK 3.0

Production MM bpd

Peak in the 1999

2.9 2.8

Percentage on 100% the maximum 95%

2.7 90%

2.6 2.5 2.4 1994

85% 1996

1998

2000

2002

2004

After peaking in Great Britain, oil production has gone through a total downfall. Conjectures of a gradual loss or even a flat trend formulated by some observers have been denied.

In light of this experience, it is unlikely that high prices and improved technology will yield higher oil production Beyond huge oil price increases, the 1980s and 1990s were a golden age of oil field technology development, including practical 3-D seismic, economic horizontal drilling, and dramatically improved geological understanding. Nevertheless, as shown in fig. 2 , the production in the lower 48 states still trended downward, showing no pronounced response to either price or technology. In light of this experience, there is good reason to expect that an analogous situation will exist worldwide after world oil production peaks: higher prices and improved technology are unlikely to yield dramatically higher conventional oil production.

Various individuals and groups have used available information and geological estimates to develop projections for when world oil production might peak. As stated in the inset at the side, many believe that this peak will be reached within ten years.

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Reduced transportation fuel consumption, new products, improved recovery techniques: the propositions for coping with peak oil A recent analysis of the Department of Energy has tried to answer the question of what can be done against oil peaking. Current or upcoming technologies were considered, regarding: 1 improvement of transportation fuel consumption 2 heavy oils and oil sands 3 coal liquids 4 improved oil recovery 5 gas to liquids It was soon very clear that effective measures depend on the implementation of huge projects and radical changes as fast as possible. This has focalized attention on available technologies that can still be improved. Instead, new technologies that require further research and development will be extremely important long-term, but not being currently accessible means that their application is still a supposition.

Hirsh believes the decline of world production is the real problem to focus on in the immediate future The states will have to take urgent and prompt action to avoid the worst The peak is a problem of liquid fuels: it is not an energy crisis An analysis was performed to outline a worldwide crash program.

Three dates have been emphasized: 1. when the peak occurs 2. ten years before the peak 3. twenty years before the peak

Avoiding the dramatic crisis due oil shortage is possible, but it’s necessary to act twenty years in advance The exact date of the peak has been left undetermined due to the relevant differences among experts. The results of the different scenarios have produced the following conclusions: – waiting for the peak to occur before intervention would leave the world with an energy deficit for more than twenty years – intervening ten years before the

peak would help, but would nonetheless cause a decade of supply shortfall – intervening twenty years before the peak allows to avoid any shortage of resources.

The reasons behind such long periods are due to the dimensions of oil consumption; a factor that is often underestimated in a world where oil abundance was considered certain for a long time. Therefore, if the measures against the peak are insufficient or arrive too late, the balance between supply and demand must be reached through a massive reduction of the demand, which will consequently cause a serious economic crisis. Vice versa, initiating mitigation on time would allow us to minimise economical impact.

To better comprehend the characteristics of the peak, a number of regions and countries that have already surpassed this phase were analyzed. Areas that have already experienced notable production peaking, not followed by important po-

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Peak oil

face to face

litical or pricing measures are Texas, North America, Great Britain and Norway. Three other countries that have reached the peak, but whose maximum production was less significant, are Argentina, Colombia and Egypt.

In all the cases examined it was not clear that production was reaching its peak until a year before it occurred; this means that the trend of production before the peak does not supply any long-term signals of risk.

In most cases the peak resembles a sharp drop rather than a progressive decline, much less the levelling at maximum production that many specialists hoped for. In some cases after peaking production declined rapidly, such as in Great Britain.

The shape of the production peak is therefore not at all obvious, but if it follows the trend of these countries and regions it’s fair to say that the world will have less than one year’s notice.

It’s mainly a liquid fuels problem. Motor vehicles, aircraft, trains, and ships

simply have no ready alternative to liquid fuels Oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has been used.

Motor vehicles, aircraft, trains, and ships simply have no ready alternative to liquid fuels. Non-hydrocarbon-based energy sources, such as solar, wind, photovoltaics, nuclear power, geothermal, fusion, etc. produce electricity, not liquid fuels, so their widespread use in transportation is at best decades away. Accordingly, mitigation of declining world oil production must be narrowly focused.

It is possible that the production peak will not materialise for another ten years or more, but it may also occur in this precise instant.

There will be no certainty until after it happens, so today the world is faced with an unprecedented risk management problem. On one side, massive mitigation initiated ten yen earlier than required may turn out to be premature. On the other, if peaking is imminent, failure to ini-

tiate timely mitigation could produce immediate social and economic costs to the world.

The two risks are asymmetric:

– Mitigation actions initiated prematurely will be costly and could result in a poor use of resources.

– Late initiation of mitigation will surely result in severe economical consequences.

The world has never confronted a problem like this. Risk minimization requires the implementation of mitigation measures well prior to peaking. Since it is uncertain when peaking will occur, the challenge for who must decide is indeed significant. Gathering consensus to face a still invisible disaster is definitely more difficult than having to face one that has already taken shape.

Transactions from wood to coal and coal to oil were gradual.

This time it will be different: oil peaking will be abrupt and revolutionary

The world’s economic development in the past century was fundamentally determined by abundant and low cost oil.

Other energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary. The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary.

As stated, oil peaking represents a liquid fuels problem, not an “energy crisis” in the sense that term has been usually used. As a consequence, the decline of world production is the problem to concentrate on in the near future.

Governments throughout the world must take timely initiative, and it may be already too late to avoid considerable hardship or worse. Hesitating countries will suffer the consequences of losing an opportunity, because in every crisis there is always an opportunity for those capable of deciding.

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Is the world about to remain without oil? It’s unlikely

face to face

The day of peak oil?

It will come but we won’t see it s the world about to remain without oil?

It’s unlikely. According to official estimates, there are, underground, more verified oil reserves today than there were thirty years ago. Despite the years of squandering oil and countless

by VIJAY V. VAITHEESWARAN end-of-the-world predictions, the world is not about to go without oil.

Oil is certainly a non-renewable resource and therefore, by definition, will run dry one day. But we won’t be around for that day, notwithstanding the increasing chorus of “oil peak proponents” that say we have already reached peak production.

Their point of view, really, is based on the idea that world oil resources are fixed and that technology is unable to make advances. None of these assertions is true. Innovative industries are investing in ever more advanced technologies regarding exploitation of reserves, pushing the “oil peak” into the future, the moment after which production will inexorably begin to dwindle. Already today, thanks to new technological advances, the global average of oil reserves exploitation has grown by 20 percent over the twentieth century, and by 35 percent at present.

This isn’t just a significant improvement, but it also means that twothirds of the existing oil in each known oilfield remains unexploited.

I

Shale oil, bituminous sand, heavy oil. The fields are huge: the problem is in the costs. But even the same high oil prices that scared us so much may turn into a strong incentive for exploiting the new sources.

But the best rebuttal to the “oil peak proponents” lies in the huge fields of “non-conventional hydrocarbons”.

Deposits of shale oil, bituminous sands and heavy oil that may be

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transformed into fuels able to run today’s normal cars. Canada, for example, has bituminous sand fields with an energy content higher than all the oil in Saudi Arabia. China, the USA, Venezuela and other countries, also have large fields of these energy sources. The problem is that transformation is more expensive, in both economic and environmental terms, than conventional crude oil.

But the very high price that the catastrophists see as a sign of impending depletion also furnishes a powerful incentive for the development of these slimy deposits - and of the technology that will allow us to exploit them in a clean manner.

The issue is predicting whether high oil prices will last forever. We shouldn’t bet on that. The high price of oil is the result of short term discrepancies between demand and supply. Another hiccup in the global economy like the Asian financial crisis could disturb the balance of the oil market by pushing the price down or up, as happened in 1997.

Will the price of crude stay this high forever? The last word hasn’t been said yet. The Saudis are rebuilding their reserves while an unprecedented wave of new oil is about to hit the market.

The key variable to be watched is the production stocks of the Organization of Oil Exporting Countries (Opec). For the greatest part of the last three decades, Opec has been able to produce more oil than what is actually put on the market, contributing to managing the price.

Saudi Arabia in particular has used its reserves to establish itself as the dominant member, flooding the market with their “cushion” reserves whenever normal global production has been disturbed, as it was during the Iran-Iraq war and the first Gulf war. Price increases seen at regular intervals during the last years are mainly the result of the fact that the Saudis have allowed their reserve capacity to go down during the

Vijay V. Vaitheeswaran. After receiving his MA in Mechanical Engineering from the Massachusetts Institute of Technology Vijay has been a correspondent for The Economist since 1992, when he started work at the London offices of this publication as a correspondent for Latin America. In 1994 he opened his first office in Mexico City where he reported the political, financial and cultural developments of the region until 1997, when he returned to the English capital. From 1998 to 2006 he was in charge of Environment and Energy.

Vijay is a member of the Council on Foreign Relations. He has taught at Stanford University, at Oxford and Yale, and he is an Associate Professor at New York University. In 2005 he published a book on the future of energy, entitled Power to the people: How the Coming Energy Revolution will Transform an Industry, Change our Lives, and Maybe Even Save the Planet.

And in 2007 his last book together with Iain Carson, Zoom: the global race to fuel the car of the future.

1990s, and the global failure to predict the increase in Chinese oil imports. In order to address the growing demand, the Saudis are spending tens of billions of dollars to rebuild their reserve capacity and an unprecedented wave of new oil – the result of investments made a decade ago – is almost ready in Russia, the Caspian Sea and Western Africa.

If the Saudi Arabian or someone’s reserves fluctuate, or if the demand, in China especially, vacillates, then the new price level, which many investors think of as permanent, will appear more and more wobbly. Opec will surely try to stabilize the price if other oil producers (or producers of oil alternatives) come onto the market. But history teaches us that the cartel is never able to maintain an absolute production discipline. Inevitably, some avid members defy the leadership and cheat in their quotas, making the high price policy hard to maintain.

We thus see that the myth that prices are decided by big oil companies is proven wrong. Every time that the price at the petrol station increases, politicians and environmentalists scream that oil companies such as ExxonMobil or BP are creating the

prices. In real life, big companies may appear as very powerful to consumers but even the biggest, with famous names, are able to do anything when facing Opec’s Goliath.

The role of Opec and of the big oil companies in the price variations of crude oil. The problem of Big Oil regarding the new wave of nationalization of wells in Venezuela and Russia today.

It’s a matter of supply and demand.

Differently from what happened during the time of the oil scandals of the 1970s, when most of the oil was sold through bilateral contracts, oil trading nowadays takes place through sophisticated and very fluid future markets, such as the New York Mercantile Exchange. It is thus difficult for companies to manipulate prices. And wherever there are suspicions of under-the-table dealings, control authorities take a hand.

It’s true that the oil market is far from being a free one, distorted as it is by myriad financial aids and subsidies. It is also true that reserves and prices are continuously subject to manipulations. But Big Oil is not a

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Peak oil

It is fair to say that among the main causes of the price increase of the oil is the unquenchable thirst for crude that China has. And now? There is no doubt that Chinese demand for oil has increased – and dramatically so – over the last decade and that the world's main energy producers have not succeeded in foreseeing the overload placed upon oil markets. This increase in demand and the recent frantic energy acquisition overseas

by Chinese companies has led many to fear that the world’s energy safety may be endangered due to the fact that China's oil needs continue to increase. In the United States this worry reached fever pitch in 2005 when one of the national Chinese oil companies, CNOOC, made an offer to purchase Unocal, a medium level American gas company. In the end the offer was withdrawn after harsh

political reactions in Washington.

But Chinese hankering for oil does not make the United States – or any other country – less safe. The main thing is that oil arrives to the market, independently from who owns it or produces it. That is why it is good news that China pays to buy oil from the world markets, investing billions of dollars to increase production.

Every barrel of oil that China produces in Chad, Ecuador or Kazakhstan is a barrel that is not bought from traditional world markets, leaving more for the rest of us and slackening prices. In contrast with everything China is doing – investing billions to increase world production – are Venezuela’s tactics: expel foreign companies and discourage new investments in the oil sector according to Hugo Chavez’s distorted principles of “patriotic energy”.

China’s oil consumption should not considered an environmental nightmare at all. This is a fear that does not take into account an important new development: China’s determination to find alternatives to hydrocarbons. There is a real, flourishing green revolution in China that does not arise from environmental concerns but from the increasing paranoia of the country's leadership regarding dependence of oil from the Persian Gulf.

That is one of the reasons why China has decided on rigid standards for economy in the consumption of fuels and Beijing is the world leader in the development of technologies relying on electricity and hydrogen.

Besides, it isn’t difficult to imagine that some technological “leapfrogging", as happened in telecommunications in the developing world during the last decade, may transform

face to face

conspirator. Opec is. Saudi Aramco, a founding member of the organization, has 20 times the reserves of ExxonMobil, the largest of the big companies in the private sector. In other words, Western companies suffer the prices, they do not fix them.

And notwithstanding record profits, Big Oil has serious problems. The oil rich countries, like Venezuela and Russia, are nationalizing their resources just as Saudi Arabia and Iran have done in the past. This means that many of the world reserves, and all of the easily accessed and cheap sources, are no longer available for most of the private companies. Western oil companies are depleting their main product, even if in absolute terms it is not like this. And this is a fact that at the end of the day could harm consumers: Big Oil is the only counterweight Opec has.

Crude reserves today are larger today than thirty years ago New technologies to better exploit existing deposits and, especially great steps forward towards more fuel-efficient cars The spectre of oil shortages is baseless, at least for the time being the next generation of Chinese cars into green machines.

Hybrid cars will not solve the oil dependency problem.

Radical changes are needed in automotive technologies which account for half the world’s consumption of crude. And a real revolution is starting.

Regarding this, another misunderstanding must be faced: the belief that the solution of the oil availability crisis may be solved by hybrid cars. This is not true. Imagine a world in which 100% of the cars are gasoline hybrids such as the Toyota Prius, and you still have a world which still depends 100% on oil. A partial move towards alternative fuels will never be decisive; the future demands a radical change both in new fuels and in engine technology. To condemn SUVs as a threat to the environment does not address the main problem: it’s not the size of the car that matters, but the fuel it burns. Two thirds of this year’s consumption in the United States – and about half of world consumption – will be by cars and trucks. Rethinking cars is the only serious way to

disaccustom the world from oil. The advanced electronics of the Prius is just a first, useful step of the clean automotive revolution, that is just beginning.

From Silicon Valley to Shanghai, inventors, entrepreneurs and environmentalists are surpassing the big oil companies and car manufacturers.

Nowadays, for new, emerging societies, it’s much easier to defy the major car manufacturers, because the fundamental technologies are no longer hidden within the company, but are put out to tender to third parties all over the world. While the automotive dinosaurs snooze, the giants in other industries invest millions of dollars to get a slice of the future market cake. It’s no joke to say that the car of the future could be manufactured by Sony, Apple or Intel. Maybe it will be designed by two teenage geniuses working day and night in their garage to create the next marvel. What is true is that such a day is coming.

Reprinted with permission from Foreign Policy nov/dic 2007. www.foreignpolicy.com © (issue year) by the Foreign Policy.

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The problem of resources is not under the surface but over it

The indescribable mysteries of oil face to face

Finding the final amount for existing quantities underground is like looking for the Holy Grail – a never ending story

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il resources are finite: this is irrefutable.

But it’s equally true that no one knows just how finite they are.

And trying to assess their order of magnitude is a very complicated puzzle. That’s why over the years the

by LEONARDO MAUGERI problem of the world’s crude resources has often been underestimated. In the 1920s, for instance, BP (then Anglo-Persian Oil Co.) refused to take a stake in what is now Saudi Arabia, thinking that the country didn’t hold a single drop of oil. In the 1960s, Mobil abandoned an area where it had drilled with no success and shortly afterwards Armand Hammer’s Occidental – then an insignificant oil company – discovered Libya’s largest oilfield in the same area. Some other assessments appear equally ridiculous today: In 1919, the US Geological Survey projected that the United States would run out of oil in 9 years, yet by the late 1920s, several huge discoveries culminated in Texas’s Black Giant field and provoked a massive oil glut that almost destroyed the American oil industry.

In the 1970s, the most important oil companies, universities, and many other influential institutions shared the view that oil production would peak in the mid-1980s, and then fall dramatically. As the CIA explained in a now-famous report, this was the result “of rapid exhaustion of accessible deposits of conventional crude oil” or – in the words of the then U.S. President, Jimmy Carter – it was because oil wells “were drying up all over the world.” Instead, in 1986 the world experienced one of the largest instances of overproduction ever, and oil prices collapsed, as they had done so many times before.

Gloomy predictions have surfaced

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again at the dawn of this century, heralding a faster-than-expected doomsday for oil, in this decade or – at best – in the next one. The verdict of these new catastrophists may appear more convincing because of their intensive use of formal statistical and probability models that seem able to penetrate the mysteries of our planet’s subsoil and reveal the ultimate truth. In fact they do not.

In fact, the reason for so many wrong evaluations in the 150-year- long history of oil is that even today no one can assess with any reasonable certainty how much crude the earth holds in its depths.

No method has yet been devised to explore them precisely, or even to gauge the extent of future oil recoverability from already-known reservoirs. In other words, while oil resources are finite, no one knows just how finite they are.

That’s why searching for the ultimate figure about the amount of oil in the earth is like searching for the

Nature has worked for thousands of years to create these formations.

They were originally immense accumulations of decomposed living organisms covered by successive layers of rock

Leonardo Maugeri is Strategy and Development Manager at Eni. One of the best-known international experts in the energy sector, he has written several books, including ‘The Age of Oil’ (Praeger, 2006), published in Italy by Feltrinelli, and “Con tutta l’energia possibile” (“With all the energy possible”), published by Sperling & Kupfer in 2008. His articles have been published in the most prestigious international magazines, including Newsweek, Foreign Affairs, Science, Forbes and The Wall Street Journal. A columnist for Il Sole 24 Ore, Maugeri is a member of the Energy Advisory Board and the World Economic Laboratory of the Massachusetts Institute of Technology (MIT), the International Councillors Board at the Center for Strategic & International Studies (CSIS) in Washington DC, and the Energy Advisory Board at Accenture.

Holy Grail—a never-ending process with many claiming to have solved what, in fact, remains a mystery. The reasons are quite simple, and begin with a very simple reality.

There is no such thing as an underground lake or cavern containing oil.

Unfortunately “black gold” is literally trapped in minuscule cells of porous subsurface rocks thousands of metres below the Earth’s crust, in what are called sedimentary basins. Seeing a piece of such a rocky deposit will astonish anyone who is not acquainted with oil geology: what they can see is only a piece of stone, which only in the best cases shows traces of oil.

Nature has worked for thousands of years to create these formations. Originally, they were huge accumulations of living organisms, decomposed and covered by successive strata of rocks that pushed them deeper and deeper into the earth until they reached a level where an impermeable rock stratum stopped them from sliding even lower. Upward pressure and high temperatures exposed those organic sediments to a chemical reaction which, over time, transformed them into today’s oil and gas. Only 30 percent of the sedimentary basins of this kind that are believed to exist on our planet have been adequately explored.

Even the most advanced technolo-

gies for mapping the subsoil – based on three-dimensional seismic (3D seismic) reflection – can only suggest the possibility of hydrocarbon deposits. Although seismic methods are sometimes compared to medical ultrasound scans that can give a fairly clear picture of the human body’s inner secrets, they do not perform in the same way. The problem lies in use of the term ‘images’.

Those supplied by seismic waves that bounce off the subsoil inner strata and come back to the surface are traces that need to be processed using sophisticated mathematical models and computer software in order to produce a kind of image.The image produced still needs plenty of analysis and interpretation. What’s more, seismic methods may be useless if – for example – the subsoil is made up of salt formations, which act as a shield against seismic waves. In other words, seismic mapping technology is still far from being able to produce a clear picture of what lies below. It is also expensive and quite new, so it has been used to study only a few basins in the world.

In the end, only an exploration well can provide more precise indications of what lies beneath the ground.

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percent. New exploration methods and technologies including the most revolutionary ones such as 3D seismic and horizontal drilling, became commercially available in the early 1980s, leading to an increase in existing reserves even without new discoveries.

A most astonishing and dramatic example is that of the Kern River field, in California. Discovered in 1899, in 1942 its “remaining” reserves were estimated at 54 million barrels. But from 1942 to 1986 it produced 736 million barrels, and still had another 970 million barrels “remaining”. And new drilling and production methods – particularly those regrouped in the so-called category of “improved oil recovery” (like horizontal and multilateral drilling, among others) – may pave the way to still higher recovery rates in the future.

All of this underlines the fact that oil reserves are dynamic in nature and that knowledge of resources is not a static concept. This is the reason why over decades, all attempts to quantify the oil reserve of our planet have proved to be too prudent, even though these calculations included probability values assigned to future discoveries and an increase in oil recovery ratios.

face to face

But exploration through wells is much less widespread than most people realize, and has been centred above all on North America, and particularly in the U.S. About one million field ‘wildcats’ (new exploration wells) have been drilled there, as against only 2,000 in the entire Persian Gulf area (300 of them in Saudi Arabia) since the inception of oil activity there. Even today, more than 70 percent of exploration activity is concentrated in North America (the US and Canada), which holds only around three percent of the world’s oil reserves. On the other hand, only three percent of exploration wells drilled between 1992 and 2002 were in the Middle East, which holds more than 70 percent of the world’s oil. But even the highly sophisticated examination of core logs brought to the surface by drilling is not that simple.

Despite the use of advanced technologies such as magnetic resonance imaging (MRI), testing sometimes leads to inaccurate or contradictory conclusions. Early in this decade, for instance, scientists at Shell concluded that the logs coming from a well drilled in Rajasthan, in India did not indicate the presence of oil, while Shell’s partner in the venture – Cairn Energy – held the opposite view.

Eventually, Cairn took over the entire block from Shell and made several discoveries, which so far amount to between 380 and 700 million barrels of recoverable oil reserves.

It is clear that the art of oil exploration still has a long road ahead and remains based on human judgment.

At the same time oil recovery from already-known fields may provide us with some surprises. Given its complex nature, a reservoir will always entrap and retain a part of its oil even after very long and intensive drilling. This means that fields that no longer produce oil and are considered exhausted still contain more or less ample volumes of hydrocarbons that simply cannot be recovered with existing technology.

This is a problem that stems primarily from the permeability and other physical features of the reservoir, as well as the limitations of available technologies and the costs of recovery.

Today, the average world-wide recovery rate for oil is about 35 percent of the estimated “oil in place,” which means that only 35 barrels out of 100 deemed to be contained in the world’s oil fields can be brought to the surface. And only a part of those 35 barrels or recoverable reserves are considered ‘proven reserves’, that are immediately available for production and commercialization. Technology is the key to increasing the quantity of oil that can be extracted.

Over the decades, the injection of natural gas and water, as well as horizontal and multilateral drilling (along with the classical vertical approach), have dramatically boosted recovery, which as recently as the late 1970s still hovered around 20

Pagina 29

Most recent resource estimates for recoverable oil in the planet made by the International Energy Agency (IEA) and based upon previous work done by the U.S. Geological Survey, amount to an estimated 2,600 billion barrels.

Near 1,100 billion barrels are proven reserves while the balance are discoveries not yet developed, or else the result of estimates regarding future increments in the recovery ratio and regarding oilfields yet to be discovered. These estimates do not take into account nearly 2 billion barrels of so-called non conventional oil (like ultra-heavy oil, shale oil and

It’s quite clear that the art of oil prospecting has a long road to travel and remains based on human judgement At the same time, extraction of oil from known oil fields may yet surprise us

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WORLD OIL REVERSES BY COUNTRY World oil reverses by country to 1/1/2007 Kazakhstan 3% Resto del Mondo 16%

Nigeria 3% Libya 4%

Saudi Arabia 22% Iran 12% Iraq 10%

Russia 5%

Kuwait 9% Venezuela Arabic Emirates 7% 9%

Eni - World Oil&gas Review

WORLD RESERVES AND R/P RATIO

Eni - World Oil&gas Review

face to face

1500 Billion of barrels

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38 1250 31 31 OPEC

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0 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 bituminous sands) the production of which is on the increase, thanks to less expensive technologies and high market prices.

New prospecting methods and technologies, including the most revolutionary ones like 3-D seismic and horizontal drilling had become commercially available at the start of the 1980s number one

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orld consumption today is about 30 billion barrels a year, with an estimated increase ratio of 2%, and the fact that so little is known about underground sources justify an optimistic outlook, with two warnings. The first concerns the importance of the price in determining the investments for new technology, exploration and development of oil resources. Historically, low oil prices have inhibited investment and encourage consumption leading, in the end, to a supply crisis as the one we witnessed in the early years of this century, On the contrary, high prices have always fuelled the launching of investments, even the current one, they have slowed down demand, a process which is now emerging, and in the end have led to a production glut.

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All of this has given the oil market its most important feature: a seesawing nature that will accompany it probably over the next twenty years.

And here is the second warning. Today, more than 90% of the world’s oil reserves are under the direct or indirect control of producing countries which are now embracing a nationalist policy about reserves.

This policy may lead to artificial restrictions of the development of new resources with the goal of keeping prices high.

It can also lead to oilfields in a declining phase to remain without the instruments or technologies required for their recovery.

At the same time, even if private industry makes massive investments in high cost areas and in non-conventional oil, it could increase the push towards alternative fuels. To put it simply, the oil problem is not under the surface but over it.

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The peak as seen from Beijing

China, mission reserves Chinese expansion desperately needs resources.

The ceaseless search for crude on all four continents

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French, US and Japanese technology (over 30 nuclear power stations are under construction); the immense hydroelectric power schemes already built, like the Three Gorges dam, or being built at the cost of displacing millions of people; and, lastly, the development of wind and solar energy: their spread has transformed landscapes like the Gobi Desert and the Mongolian steppe.

But please do not think that in Beijing there is open debate on energy policy scenarios, like the debate in which a wide variety of civil players take part in Western democracies.

While it is true that the decision-making process in Communist China does have a pluralist aspect, it is only within a very restricted circle of representatives: strictly political leaders; the think-tanks whose job it is to provide the government with information and projects (the Academy of Social Sciences in Beijing, several

Binding contracts and strategic acquisitions to fight the West for oil down to the very last drop And then there’s China’s new, wide-ranging navy

branches of the Council of State, and the research centre of the Central Bank); and a number of state industry lobby groups that constitute major power bases in themselves, like the oil companies and the car makers. This scant transparency does not stifle the emergence of differing opinions, conflicts of interest, and tensions between short-term and long-term objectives. The question of oil scarcity, because it is so closely linked with environmental problems, global warming, and China’s geostrategic positioning and foreign policy choices, is a litmus test for the role that the Beijing ruling class intends to have in the world. The oil dilemma also represents a constraint on the development policies on which the Communist regime has built its cornerstone of consensus: the middle and upper classes in China’s big cities have just entered the age private car ownership, and owning a car is seen as a powerful status symbol and one of the tangible results of the “social pact” that has deferred political democratisation in exchange for accelerated economic growth. And all these dimensions of the oil question demand immediate attention, since the Beijing Olympics (among other initiatives) are threatened by an environmental crisis that could mean heavy sacrifices in terms of energy consumption.

Three illuminating news items from early 2008 show the chinks in the relationship between China and oil scarcity: 1) The first is from Guangdong, a southern province (adjacent to Hong Kong) which has the hi-

Federico Rampini is Beijing and Asian correspondent for la Repubblica. He has taught at the universities of Berkeley and Shanghai, and has been a columnist for both Le Figaro and Politique étrangère. He is also author of numerous essays including "Il secolo cinese" (‘The Chinese century’), 2005; "L’impero di Cindia" (‘The Chindian empire’), 2006; "L’ombra di Mao" (‘Mao’s shadow’), Mondadori 2006; “La speranza indiana. Storie di uomini, città e denaro dalla più grande democrazia del mondo” (‘The Indian hope. Stories of men, cities and money from the biggest democracy in the world’), 2007.

ghest per capita income in the country and the highest density of industrialisation. In March 2008 Guangdong underwent its worst energy shortage of the last 30 years. The gap between electricity production capacity and consumption needs reached 12 million kilowatts in a month (50 million kW of demand against 38 million kW produced).

Many manufacturers in the Pearl Delta, the “Factory of the World”, had to ration production by working only four days a week, due to the shortage of electricity. Yet plans to build new power stations are dominated by coal, followed by nuclear power. 2) Also in early 2008, following state oil company Petrochina’s listing on the stock exchange, it became the company with the highest share capitalisation on all stock exchanges worldwide, comfortably passing out American giants Exxon, Microsoft and General Electric. 3) The hyperinflation of generic foods, with increases of up to 50% annually in pork prices, has in part been due to conversion of arable land to production of biofuels to reduce depen-

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ust twenty years ago China was the biggest oil exporter in the Far East. Today oil from its domestic fields meets just a fraction of its national requirements. By 2005 China had become the world’s second biggest importer of

by FEDERICO crude. In 2007 at RAMPINI least one-third of the increase in world demand for oil was accounted for by China. In no other country in the world is the concept of “oil peak” – the idea that oil resources have already passed their historical peak and are now on a downward curve – so tangible and palpable as it is in China. Chinese foreign policy is driven by the energy imperative, and it’s being done with an unusual approach: precisely because China is already experiencing energy shortages at near-emergency levels, and is designing its strategies to cope with a future where oil will be physically scarcer, China’s state oil industry is hoarding foreign oil fields by “binding” them with long term supply contracts in exchange for Chinese investment in local infrastructures. From Iran to Sudan, from Angola to Latin America, and of course in many countries in Southeast Asia, China is using its new financial riches to block long-term access to oilfields, offering those countries the Chinese model of modernisation. The worldwide expansion of Chinese capitalism through acquisitions is also largely driven by the imperative to gain access to oil resources, while there still are any: the first major “raid” attempted by China in the US was the bid for California oil company Unocal; it was vetoed by the US in 2005. A rather better reception was in store for the sovereign fund that manages the currency reserves of the Chinese central bank three years later, when the red carpet was rolled out for its entrance to the BP shareholder ranks. Other aspects of the Chinese development strategy are conditioned by forecasts of a future without oil, or a future with an ever-dwindling oil supply: its growing dependence on coal for producing electricity; renewed investment in nuclear energy with

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dency of China’s cars on petrol and diesel derived from oil. And behind revaluing the Chinese currency over the dollar (the Chinese renmimbi rose by 20% in two years) was the need to rein in inflation on imported energy via the oil deficit.

face to face

Urbanisation and energy: the limits of development

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A demographic bomb or, more cynically, the “yellow peril”: this was a hot topic even in Mao’s time, but the Chinese then were less than half as numerous as they are today and all they wanted was a bowl of rice a day. Then, the real constraints on development were the bungling mistakes of government, lack of capital, technology, and the right incentives.

Today the only real constraint is a different one: the exhaustion of natural resources.

In 1950 China created just one per cent of world CO2 emissions. It was almost as if the country didn’t exist.

The International Energy Agency (IEA) warns that by 2030, i.e. in just 23 years, the Chinese will have seven times more cars than they do today (270 million), and their energy consumption will have more than doubled. Within three years, China will have overtaken the US in oil consumption: just two years ago, the US demand was still greater by a third.

Every Chinese peasant that gives up farming and moves to the city, to work in a factory or as a bricklayer on the construction sites, will on the average increase his contribution to GDP by 700%. His environmental footprint, i.e. his overall consumption of natural resources, will similarly increase. Every year on average 15 million Chinese leave the countryside, attracted by industrial metropolises (or driven away by a living from farming that can no longer support them). Chongqing has 30 million inhabitants, Beijing and Shanghai are approaching 20 million each, and various other cities like Guangzhou (formerly Canton), Shenzhen, Hong Kong, Hangzhou, Tianjin, Chengdu and Nanking are approaching or have already surpassed the 10 million mark. “Average” cities like Xian, Harbin and Dalian, with over five million inhabitants – a population that a city like Rome will only ever be able to dream of – number in the high tens. Chinese development is accompanying a phenomenon of urbanisation that in terms of sheer scale is simply without precedent in human history. It’s not even equalled anywhere else in the world today, seeing that in India (the only country of comparable demographic dimensions) the rural exodus is proceeding more slowly. The Chinese urbanisation is an essential aspect of the country’s modernisation drive: today, for the Chinese, to stay and till the fields in the rural regions means choosing to go without a major jump in income, or to defer it by a generation. There is simply no way that farming in China could, or

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will ever be able to, offer a desirable standard of living for the 750 million inhabitants of the countryside. And an essential ingredient of China’s economic rise is precisely the availability of this “reserve proletariat army”, an enormous pool of low-cost labour that industry and services can count on for a very long time to come. The future is in cities: of that the overwhelming majority of Chinese have no doubt. But the cities are also where today China is experiencing a twin emergency: the boom in consumption and the explosion in pollution. Urbanisation is the key to understanding the drama that China is going through: for the first time in its history it is coming up against its limits of development, and this is clearly visible in the huge, choking traffic jams that paralyse the wide urban motorways in its cities. In many areas of Beijing and Shanghai, past urban planners have shown uncanny farsightedness, building a network of flyovers, ring roads, ring motorways and bypasses with eight and even sixteen lanes, cutting through areas that are today in the very hearts of the cities. Yet at rush hour these vast expanses of tarmac are a tangle of cars at a standstill, the scene of the most gigantic traffic jam on the planet.

Beijing is at one and the same time the political capital, a huge centre of wealth production, and the city that for seven years has been preparing to host the Olympics. For these reasons it is going through an experience that will be crucial for the whole of the rest of the country. The choices made in current years allow some insight into the tensions that all of China is experiencing in its attempts to make its monstrous megacities governable in the long term, including in terms of meeting their energy requirements. It is precisely because the Chinese regime had major expectations of the function of the 2008 Games that the commitments it undertook to set right the environmental disruption in the capital – and therefore to discipline its energy consumption – are a decisive test for the country as a whole. In a certain sense Beijing has set itself “Olympic targets” of air quality and health that could become a reference standard for years to come in terms of Chinese environmental policies.

The enormous problems that Beijing has tried to solve in recent years are the challenges the entire country will face in the future. Beijing’s Olympic efforts have become a litmus test for what can be done, as well as what cannot be done: efforts to reduce the smog for the Games are meeting with stiff resistance.

The size of the challenge is colossal.

By the end of 2006, forging ahead and breaking all predictions, China achieved a new world record, and several years in advance: it is now the single biggest source of carbon dioxide released into the atmosphere. China has stripped the US of its unenvied title as worst climate

In just 23 years the Chinese will have seven times as many cars as it does today (270 million) and their energy consumption will have more than doubled In three years its oil consumption will overtake that of the US change offender. The China-US overtaking had been forecast by experts, but they thought it was further away: the International Energy Agency (IEA) had initially said that it would happen by 2010. China beat them by four years. The final figures for 2006 were taken by independent scientists under the aegis of the Netherlands Environment Assessment Agency. Scientists measured 6.2 billion tonnes of carbon dioxide that China released into the planet’s atmosphere, an increase of 8% over the previous year. The US in 2006 released “only” 5.8 billion

tonnes of CO2, a slight fall (-1.4%) on the previous year. A fundamental contribution to China’s overtaking of the US came from the formidable upgrading of its electricity production. This, too, is an effect of modernisation of the Asian giant: more factories, more building sites, and more consumption by mass urbanisation (home appliances, air conditioners, and computers). In a highlyenergivorous industrial sector like concrete, China – land of megacities and skyscrapers – now accounts for 44% of world production. To satisfy the boom in electricity needs, in the last five years China has increased its power station capacity by 150%. This growth is accelerating exponentially. Right now, every four days China is opening a new thermoelectric power station with enough power to light a city of four million inhabitants, or Rome and Milan combined. Over the next eight years China will open 550 new thermoelectric power stations, or in other words it will add the equivalent of all the power stations that currently exist in the entire European Union. Two thirds of these power stations use coal, the energy source with the highest levels of CO2 emissions. But coal is also the only fossil fuel that China has in abundance, and it is also much cheaper than oil and natural gas…if you exclude the human cost, of course: 6,000 miners die every year to bring coal to the surface.

China’s overtake of the USA is bound to increase the political pressure from the rest of the world upon the

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authorities in Peking to make them adhere to an international agreement on reductions of carbon emissions. The Olympics effect will reinforce this tension. The Games – which were originally intended by the rulers of the People's Republic to be a grand occasion to consecrate their own international “respectability” – are becoming also an opportunity for an ever closer scrutiny by the West. The question “Will the Chinese be able to bring down Peking’s smog to acceptable levels by August 2008?” has turned into a simplified metaphor to summarize the terms of the overall challenge awaiting China regarding climate change. Actually, placing emerging powers and countries with older industrialization on the same level is open to debate. On the one hand climate change was triggered by pollution accumulated over the past decades, in which China’s role was marginal. On the other hand current responsibilities appear under a different light, if instead of considering total amounts we analyze per capita emissions. The de-

structive impact of China is linked to the size of its population: 1.3 billion inhabitants. But individual citizens of the People’s Republic still consume much less than our own citizens and therefore they pollute far less. The 750 million Chinese living in rural areas live on less than three dollars a day. For the time being carbon emissions of Chinese consumers, on a per capita basis, are only about one fourth of the American ones and a third of the European ones. The same applies to oil consumption, measured on a per capita basis. Fairness aside, however, the same Chinese authorities realize that their demographic dimensions are themselves a problem: The impact of the Chinese population upon the natural resources of the planet is unprecedented. Not by chance the leaders of the People's Republic are determined to continue with their birth control policies and their rigid "one child" rule. An aggravating circumstance is derived from the population size. The development model favoured so far by China’s take-off – based upon their role as “factory to the planet” – has assigned a dominant role to the most energy-hungry industrial sectors, from concrete to steel, from cars to buildings. Very few restraints have been applied to these sectors in terms of energy efficiency. As a matter of fact the Chinese economy today is a monument to waste. Practically in every productive area the country uses production techniques that consume more energy than their Japanese, European or Ameri-

can competitors. In order to manufacture 10,000 euros in manufactured goods and industrial products, China consumes seven times more energy and natural resources than Japan (at an identical production level), six times more than the United States.

In August 2007, the first experiment in mandatory reduction in car traffic was carried out according to the odd and even license plate rule. For four days circulation was reduced by a million cars, from a total number of 3.5 million vehicles in the capital city. Traffic reduction will become permanent during the Olympics. An executive eviction has hit one of the last industrial dinosaurs of Peking, Shougang steel works built in 1919 only 17 km away from Tiananmen Square. The blast furnace was erected in a distant place, on an artificial island of the coast of Hebei in northern China. About forty industrial facilities and thermal power plants have been moved to distant regions.

Serious measures like these betray the growing alarm of the Chinese regime. Among the many challenges that the People's Republic will have to conquer within a year, pollution is so far the most persistent adversary.

The toxic particles that we inhale daily in Peking’s air surpass by 78% the maximum levels allowed by World Health Organization. This city, although covering a surface as large as Belgium, is a giant gas chamber where everybody is being suffocated.

750.000 premature deaths: is the slaughter that smog causes in China every year. This estimate is found in an in-depth analysis carried out by the World Bank about pollution damages in the largest nation of the planet. The authors have used the criteria used all over the world by indication of the World Health Organization (WHO) The level of airborne pollution is measured through the concentration of toxic particles in the air we breathe. The WHO has established the danger threshold for survival at 20 micrograms. Only one percent of the Chinese living in large cities breathe air with less than 40 micrograms of toxic particles. 58% of the inhabitants of Chinese cities breathe air with more than 100 micrograms of toxic particles.

Authoritarianism and consensus: the automotive policy With a yearly 12% increase in the GNP, the well being of the urban middle class adds 1,200 cars per day to the number of vehicles in circulation in the congested superhighways crossing Peking. Even an authoritarian regime like the Chinese one reveals limits in their decision making capacity. The restraints of consensus leak out also into the steps, or half hearted steps, with which the smog emergency is being faced. Still, even Peking which is one of the richest cities in China has an individual car

ownership far lower than those of the rich Western countries. The compact car is the dream of middle class families, now numbering near 200 million in all China. The emotional relationship with the car resembles the one that characterized the Italy of the economic miracle of the Sixties. few thought about the environmental damages then, the conquest of new mobility was the trend then, the emancipation of the individual.

For the Government in Peking the consensus of the urban middle class is the mainstay of political and social stability. And the automotive industry is one of the strategic areas upon which China counts for its own development. It is not by chance that cars are one of the last sectors for which the government demands foreign companies to enter into joint ventures with local partners. Another emblematic resistance transpires regarding the project – discussed in several opportunities – to close down all the factories in Peking’s urban belt two months before the Olympics. No less than the secretary of Peking’s communist party Liu Qi, (who is also the president of the Olympic Committee) intervened on September 17, 2007 to put an end to the indiscretions regarding this measure, and he did it through a very unusual method: an interview with the Financial Times, a world known means of communication. Liu said that he had "never requested the interruption of activities of the industrial facilities" during the Games.

He has stipulated that the control of polluting gases emissions of those factories will be enough, without need of paralyzing production. It has been held that “athletes will be able to participate normally in the events in August 2008”, and in order to strengthen their optimism a number of highly unbelievable data has been spread regarding the quality of air in the Summer of 2007. The exit of the number one man in the communist party of the capital city has not perhaps closed the debate completely. It is possible that in front of Olympic games “darkened” by smog the government will have to take extreme measures. But Liu’s position speaks volumes about the interests that have been affected, about the forces at stake, about the nature of the opposition. Communist nomenclature is one of the parties in a social contract with the new Chinese capitalist bourgeoisie. To maintain economic growth according to the model followed so far, the high profit level, the possibility of investing and producing without having an impact upon too stringent regulations and control, are implicit clauses in this social pact. The building speculation and construction sector – as in every country in the world – is one of the privileged places were politics and business are interwoven. The level of corruption is high in every area of Chinese economy, with peaks in the real estate business. It is clear that the government has not

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Beijing could reduce its energy consumption by 20% if its buildings adopted the latest energy-saving developments

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prices imposed by the government do not allow any profit. In fact, from the utilities bill to petrol and diesel, consumer prices have not reflected cost increases at the source. Tariff control is a nearsighted choice that does not foster energy saving. It answers to a demand for consensus that is present even under authoritarian regime. Communist rulers do not forget that in 1989 the Tiananmen movement conquered widespread popular support due to the social unrest cause by the strong increases in cost of living expenses.

face to face

The Chinese “mafia” in search of resources in four continents

got the strength to impose upon the builders, the standards that are required for the conservation of energy and for environmental efficiency, because it has to do with one of the “strong powers” in today’s China.

More in general, the best way to achieve substantial reductions in energy use would be adopting transparent prices – eventually with the addition of a coal tax – that would force the users to pay the real cost of the pilfered natural resources. The People's Republic is a long way from this. All energy prices, from electric power to petrol, are widely subsidized, managed according to political criteria, and well under their effective cost. The behaviour of every category – from industrial entrepreneurs to real state builders, from automotive companies to big farmer purchasing fertilizers – are distorted from a price structure that does not encourage saving. Here too, notwithstanding the authoritarian nature of the regime, short term consensus logic prevails. There has been a cross-check during the 2008 lunar New Year, when by late January millions of Chinese remained without electric power for over a week. Record snowfalls had blocked trains and highways from Nanking to Canton. To the real difficulties that slo-

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Industrialisation, urban growth and motorisation are driving an energy spree that nobody can stop: the weight of the two Asian colossi on world oil availability But they’re not the only ones who have to find solutions wed down transportation of coal and oil, the big power companies added an orchestrated shortage. A power struggle with authorities could be sensed behind the blackout For a long time energy producers – State shepherds watching out for profits – have complained that the political

“I am not worried about foreign investment in America. Protectionism as an answer would be a mistake”.

George Bush was forced to intervene on December 19th, 2007 in order to reassure Americans after the China Investment Corporation blow: that day the Sovereign Wealth Fund of the People's Republic bought 10% of the Morgan Stanley bank for 5 billion dollars. Americans realized they were the prey of an unprecedented invasion. The operation that Bush condoned in the name of liberalism was a creeping nationalization: a historical Wall Street institution was breached by the forces of capital belonging to a foreign power. Not a two-bit, friendly state like Abu Dhabi or Singapore but America’s rivalling superpower, Communist China, the biggest authoritarian regime of our times. Bush tried to render the fact less dramatic but his words could sound like a surrender. A few days before entering into Morgan Stanley the very Chairman of the China Investment Corporation had launched a menacing warning. “The western governments will not use national security pretexts to cover up protectionism or we will boycott them”.

Whoever tries to stop the press roller of Chinese investments will pay the consequences. America cannot afford it. The Sovereign Wealth Fund chaired by Lou Jiwei is the emanation of Peking’s Central Bank, Washington’s richest creditor. Through their commercial deficit the USA have allowed the People's Republic to accumulate 1,700 billion dollars in monetary reserves. 800 billion from that amount were invested in US Treasury bills: the financing of American public debt depends now from Mao Tse Tung heirs. With these riches China finances their world wide expansionism. According to Li Yang, the director for the Chinese academy for social sciences “the Sovereign Wealth Fund will manage the strategy of Chinese resources on a global scale” The purchase of 1% of BP in April 2008 is in line with this vocation.

The chronicles of the assault on the bastion of U.S. capitalism is very recent. Only in 2001 the WTO admitted Peking as a member. Western multinationals celebrated the opening of

the largest market in the world. The first surprise arrived in 2004. Shanghai’s TLC bought the mobile phone company from France’s Alcatel and the historical American TV brand RCA. On December 7th, of the same year the IT company Lenovo, founded by an officer in the People’s Liberation Army, plucked the personal computer branch from IBM. Ten thousand IBM dependants, a symbol of American technological supremacy, are now under a Chinese boss.

The following year Washington rebels when China National Offshore Oil Corporation tries to acquire California oil company Unocal. By early 2007 the sub prime crisis brings the banking system to its knees. The People's Republic profits the opportunity for a series of lightning strikes in the temples of Western finances.

In a rapid succession the Blackstone Investment Fund (May), Barclays Bank from the UK and the Belgian Fortis (October), Morgan Stanley (December) have to receive the Chinese State stockholders as their “saviours”.

Chinese penetration has not been triggered only in the heart of U.S. Capitalism. The expansion takes place in all continents. Already by late 2006, Peking’s Ministry for Commerce had direct investments in ten thousand major companies in 160 countries. One of the foreign acquisition criteria is to corner natural resources, from energy to minerals, from woods to food crops. Canada and Australia, Brazil and Indonesia, all the major raw material producers are invaded by Chinese investors. A geostrategic vision emerges, the People's Republic lays a trap on zones of influence that belonged to the West. The People’s Daily describes “the inevitable decline of the American presence in the Middle East”, and thus Chairman Hu Jintao signs in record time “treatments for the protection of Chinese investments" with 16 governments in Arab countries. 352 Chinese companies are now present in Egypt, one of the more faithful Washington allies. Investments have reached Saudi Arabia, Oman and the United Arab Emirates, Algeria. Sinopec oil company obtains from Iran the exploitation of the great Yadavaran fields: oil reserves of 18.3 million barrels.

At the same time the Chinese ruling class is well aware that “peak oil” may be quite near. The national energy plan launched by Peking establish the target of producing 10% of the national electric energy through non-fossil and renewable sources, it intends to diminish by 20% the energy consumption of their industrial production. But Peking is ready to dispute the last drop of oil with the West. The construction – for the first time in five centuries – of a long range military fleet able to defend the sea routes from the Persian Gulf to China, is an unequivocal sign.

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FORECASTS

FROM ITALY

by ANDREA ROMANO

Time goes by even for the most stable of couples

The lines along which we have discussed Europe, pro and con, over the last fifteen years First of all there is progressive Europeanism, the approach that has largely dominated Italian thinking on the matter.

This is Europeanism dominated by federal pride, steadfastly hostile to the centrality of the national state and stubbornly convinced that the destiny of our continent lies in the formation of a “United States of Europe”. This is without wishing to take

The inadequate europeanism of italian politics anything away from the historical-idealist merits of Altiero Spinelli of course. But it is evident that the religion of European federalism is now the equivalent of a blunt sword. For many it has succeeded in replacing the supreme ideal that has driven the evolution of Italian communism, for others it has represented nothing more than a way of going the extra mile. Yet if we take a close look at the miracle of European integration and seriously consider what is likely to become of the European Union, the almost irenic vision of Europe that federalism presents us with is no longer satisfactory: a feelgood realm where “national egoism” dies out as a matter of course and where there is no room for “intergovernmental alchemy”.

The result of a moral rather than political vision of European federalism, the Europeanism of Italian progressivism has had a single, unerring goal, whilst awaiting a long-expected palingenesis that in the meantime provides both us and our day-to-day political activity with a sense of identity.

The moral basis of progressive Europeanism has been amplified by the specific role that European enterprise has played in Italy: that of miraculously curing our institutions, our politics of its innate weaknesses. In this way, Europe has been able to give Italy something that Italy could not manage to provide for itself, acting as such as a powerful but external relation.

The consequence being that we are the only major European country that views European enterprise not as an opportunity to exploit our potential but as a way of ridding ourselves of a national

identity which, although weak, is seen as embarrassing. In a certain sense this has benefited Italian Europeanism, which has always been stronger in Italy than in any other comparable nation. On the other hand, it has also resulted in a profoundly rhetorical interpretation of progressivism. Which, as such, has found itself largely unprepared to deal with the institutional crisis and the crisis surrounding the legitimacy of the EU. This moralistic perspective gives us little idea of the way in which the European question has actually evolved – the balance between thriving and conflicting national interests, which have managed to coexist at a European level – and even less so a political perspective as we enter a new era of Italian Europeanism. A Europeanism that is suitable for an international environment marked by the increasing integration of regional and functional institutions, that pushes Italy to adopt a consistent and responsible policy of national interest.

Equally outmoded is the European vision that the Italian centre-right has adopted over its fifteen-year lifetime. With no foreign policy tradition of its own, it initially cobbled together a policy by borrowing ideas from its various political factions and ideals. In 1994 in Rome - during the Polo della Libertà’s first term in office this resulted in the vehement opposition to the admittance of Slovenia to the EU in the name of the Istrian-Dalmatian refugees. At the time it seemed perfectly natural to the centre-right to revive an old revanchist platform that for many years had formed part of the foreign policy of the Italian Social Movement. As

such they demonstrated a serious misunderstanding of the new possibilities that the European Community could offer, even in terms of solutions to questions such as that of Istria-Dalmatia, and of the dynamics of the disintegration of the multinational empires of real socialism. The centre-right’s second term in office was marked by a less nostalgic approach to the national interest, its foreign policy this time based around two main issues. The first of these was relations with the US, which took the form of a completely bilateral and “privileged” relationship with Washington, with Rome seeking “best friend” status as part of a strategy reminiscent of the Cold War alliances. A vision of Italian-US relations that was quite different to that traditionally expressed by Italian moderatism – which had never really questioned the multilateral nature of the Italian-US relationship – and that sought for Rome a privileged, solitary position of importance. The second policy to shape the centre-right’s foreign strategy was its deep scepticism of the potential of European integration. Equal and opposite to the centreleft’s peaceful and moralistic Europeanism, the Italian centre-right’s diffidence towards the European Union took the form of a mix of the Northern League’s glorification of local identity and of popular criticism of “Brussels bureaucracy” and its “democratic deficit”.

Today, in mid-2008, the analytical tools available to us are wholly inadequate to guide us as we navigate Europe as well as the wider world

Is a leader writer for La Stampa and professor of modern history at Tor Vergata University in Rome. He has worked as a researcher at the Fondazione Istituto Gramsci and as a political advisor at both the Ministry of Defence and the Ministry of Foreign Affairs (under the Prodi and D’Alema governments). From 2000 to 2005 he was director of the Fondazione Italianieuropei, chaired

by Massimo D’Alema and Giuliano Amato, and editor of the bimonthly magazine of the same name.

For Mondadori he published, in 2005, The Boy.

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working tools

And there can be no doubt that the marriage between Italy and Europe has begun to show its age, with the evidence of their up and down relationship fully visible in 2008. Are we still the most pro-European nation on the continent? Where does the balance lie between our proEurope and anti-Europe sentiments? But above all, are we certain that the image of Europe projected by public debate accurately reflects the developments on the horizon?

These are some of the questions we will be faced with in the next few weeks when the government formed in the aftermath of Italy’s April elections formulates its foreign policy. We will have to face these questions simply because Europe cannot afford to have an Italy that is anything but strong and determined as a new and difficult era dawns across the world. Lastly, we will have to face these questions because for some time now our position in Europe has been crying out for clarification. We would be fooling ourselves, harming ourselves even, if we thought that a discussion on Europe in 2008 could follow the same lines as a similar discussion just ten years ago.

While it may be true that in Italy everybody gets a second (or third) chance, it is equally true that the world continues to turn and that the political thinking developed in Italy to tackle the European question is now unsuited to the new and fractious world in which we live.

The closing of the curtain on this period of neoconservatism in the US – which has become an inevitability over the last few months and which should be confirmed by the elections at year-end, whoever the eventual winner may be – looks likely to lead to a reevaluation of the deep-rooted anti-American sentiment among Euro-federalists, as well as the centre-right’s stillexisting ambition to forge an exclusively bilateral relationship with the White House. Going beyond purely political circles, the new recessionary economic cycle and the crisis affecting free trade that has dominated the last decade have pushed us to study the true virtues of Europe with greater pragmatism and to finish the pursuit of any federalist ideals we may have once and for all.

Surprising though it may seem – at least in the light of traditional Europeanism – it is possible that the economic turbulence and the new spirit of protectionism taking hold both in Washington and in Asia will lead us to appreciate the European Union for what it is rather than for what we wished it had become. It is therefore a real tool of convergence for real policies in both the energy and financial fields: a Europe finally free from (our) federalist hot air and able to speed up the formulation of common policies, just as we saw happen when the European Community first came into being. And we may even see Italy go beyond merely expounding Europeanist rhetoric to become a key player in this Europe in the near future.

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FORECAST

EUROENERGY

by GUIDO GENTILI

The utopia of the perfect market working tools

A single voice, a single strategy

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The EU’s political and energy policy, as delineated by the Commission, can be summarized in these six simple words. The 2006 Green Paper describes the prospect of a “perfect” economic and political (the order is by no means random) Europe, given that a strategy “based exclusively on 27 national energy plans is not sufficient.” In adopting a unified front, Europe has “the necessary weight to protect and enforce its interests” and the political capacity to tackle the new scenarios. However, Europe “has not yet instituted perfectly competitive internal energy markets” and stringent regulations have to be imposed in this sense.

The concept of “competitive perfection” is one of the Commission’s keystones. The “national samples” do not form part of this strategy. In Brussels there is a wellrooted determination to combat European and extraEuropean energy monopolies through the full unbundling of the energy distribution networks from production.

On the one side the suppliers, on the other the distributors. In this vision, only complete liberalization will lead to true competition and the reduction in consumer prices. There are however those who, in a more political vein, see this drive for “competition” as being stimulated by antiRussian pressure from the USA and the containment of Gazprom, Putin’s great geostrategic asset that already has footholds in Germany, Austria, France, Italy and Hungary. As for political and diplomatic action, the Green

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model of a EuroMediterranean energy community; reinforced cooperation with Algeria and Egypt; the creation of an Energy Security Partnership with the USA; the importance of Turkey as a transit hub in the diversification of EU gas supplies; an EU-Russia partnership that “could only be based on the principle of non-discrimination and fair treatment and on equal market access conditions.”

Stop and go europe Paper places the emphasis on the need to agree on an “external energy policy”, the efficiency and coherence of which will depend on the creation of a competitive internal market. In this context, the gas sector, with the construction of new infrastructure (the gas and oil pipelines and terminals for liquefied petroleum gas necessary for securing supplies) and the necessary third-party transit and access permits for the existing infrastructure, is crucially important. There is talk of “independent supplies” and of a new EU-Africa strategy that “could help Europe diversify its gas and oil supply sources”. With regards to Russia, the principal EU supplier, it is said that only “a true partnership would guarantee security and predictability for both parties, paving the way for the necessary long-term investments in new capacity.

It would also mean fair and reciprocal access to markets and infrastructure including in particular third party access to pipelines.

A more ambitious energy policy?

The Green Paper has already been received by the European parliament with a certain grassroots scepticism.

The resolution approved states that the Green Paper “neither proposes new objectives nor puts forward concrete proposals.” The Commission is therefore invited to adopt a “more ambitious energy policy.”

Furthermore, indirectly noting the underlying abstractness of the analysis, it is noted that “energy policy, in the strictest sense, is to be associated with foreign and security policies.”

Even taking into account all its limits, the European Parliament’s point of view is important in order to verify the ambitions, progress and delays in the European construction process; the energy question included. In the September of 2007, the report by Jacek SaryuszWolski (an EPP member) approved by a wide majority, once again notes a political void surrounding the EU as a “global player.” It is necessary, as the resolution explains, “to develop concrete

dispositions, to be inserted in the treaties, that lead to the creation of a common European foreign policy on energy.” The report also calls for the appointment of a “high-level representative for foreign policy on energy responsible for co-ordinating all policies under the scope of the common European foreign policy on energy” (a high-level representative who should act under the authority of the newlyinstituted EU high-level representative for foreign policy and security). How should energy supplies and suppliers be diversified? A politically non-neutral reply: “Priority to all those projects aimed at creating new transport corridors which diversify both suppliers and routes, such as the Caspian Sea-Black Sea - EU Energy corridor and in particular the Nabucco pipeline” (the “alternative” pipeline promoted by the USA and Europe that in the future should supply the EU without crossing Russian territory, linking central Asia and Austria by way of Turkey), the creation of new national energy markets on the

So, is Europe closer to the definition of a true common energy policy or not? Yes and no. In terms of the strategy for fighting climate change, a concrete path has been traced with the package of proposals recently approved by the Commission, although it should be clear that the process will be neither easy nor painless. The objective is to reduce greenhouse gas emissions by at least 20% and to raise the consumption of renewable energy to 20% of the total by 2020. Legally binding objectives are foreseen for the various governments and with a revision of the emission trading system (that will impose a ceiling on community-wide emissions) all the principal sources of CO2 emissions – in practice all the major industrial plants – will be encouraged to develop clean production technologies. The president of the Commission Manuel Barroso commented: “this package responds to a great political challenge and provides the right reply to the question of energy security.”

However, as one path opens up another remains problematic, as is the case with that described in the

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new Treaty of Lisbon, due to come into force before the European election in June 2009 once the ratification procedure has been completed. Returning to the question: can there be a common energy policy in the absence of a true common foreign policy? The old (and rejected) constitutional treaty provided for a “Minister of EU Foreign Affairs” while the Treaty of Lisbon proposes a High-level Representative for Foreign Affairs and Security Policy and a European External Action Service, a kind of embryonic diplomatic corps. Are the differences merely lexical? Not really, given that a declaration has been adopted – after pressure from Great Britain in particular – that underscores the inter-governmental nature of European foreign policy and the role played by the individual member states and their own foreign ministers and diplomatic policies. This is not all. The attribution to the EU (another innovation) of the status of a single international legal personality might suggest an epoch-making change given that the EU would thus acquire the capacity to draw up international agreements binding for both institutions and the member states.

However, here once again is the declaration explaining “the fact that the EU has a single legal personality will not in any way authorise the Union to legislate or to act beyond the competences conferred upon it by the member states in the treaties.” In short, while it is true that a degree of progress has been made, it is just as true that the “spirit” of the intergovernmental model continues to prevail. Many

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years ago, when he was the American secretary of state, Henry Kissinger jokingly asked: “Who do I call if I want to call Europe?” As provided for by the Treaty of Lisbon approved in the December of 2007, Europe will also have a President of the European Council as its representative. Kissinger will therefore finally know who to call. However, it is by no means certain that the USA, or Russia, or China will not also call (or call instead) London, Paris or Berlin. In fact, the great energy conundrum demonstrates that a true common European policy in this crucial area has yet to be adopted and that currently a realistic overview of the problems reveals more unknowns than certainties.

Sarkozy the player During the course of the past year, Sarkozy’s France has at times been the hub around which Angela Merkel’s Germany and Gordon Brown’s Great Britain have revolved. Sarkozy’s new French protagonism was sparked even before he was installed in the Élysée: when

he launched the project for the Mediterranean Union (22 countries, from Portugal to Syria) along the lines of the dream (that subsequently became reality) of the founding fathers of the EU. A project that in a sense interferes with the EuroMed partnership launched in Barcelona in 1995 and that – by no means coincidentally – has among its principal features “sustainable development and energy” on the basis of the development of electrical interconnections, Germany put an immediate brake on the ambitious French project (there is no place for an institution “parallel” to the EU declared Merkel) while Sarkozy gave assurances that his plan provided for an aggregation “open” to any interested European nation. This led to the launch of a FrancoGerman draft project that, in view of the European plan to reduce CO2 emissions, has energy as its true raison d’être All the more so if one considers that historically France and Germany have both opposed the separation of production from the distribution network and are

both interested in reviewing the objectives and regulations of the European authorities. The FrancoGerman axis was in evidence again during the last NATO summit in Bucharest where Sarkozy supported the reinforcement of European defences and also (an historic shift) confirmed Paris’ return to the allied military command in 2009. The French and the Germans managed to delay Georgia and Ukraine joining NATO (a development close to the heart of Putin’s Russia, in contraposition to George W. Bush, Canada and the countries of Eastern Europe), in part as a result of the role played by the two countries within the energy scenario. In practice, European foreign policy is firmly in FrancoGerman hands: allied with the USA, albeit as a protagonist, while at the same time aware that the EU, in terms of energy, has to deal with Russia (of total imports of gas and oil 45% and 30% respectively come from Moscow). However, Sarkozy (to whom Bush paid a famously American compliment in declaring him

to be the “most recent reincarnation of Elvis Presley”) has not been content to play on the ParisBerlin axis. He has, in fact, also been looking to London and has constructed a new draft agreement in the field of nuclear power subsequently to be extended to other European countries.

The pact provides for British companies having privileged access to French nuclear know-how in order to acquire market leadership in the construction of power stations. The final objective: an Anglo-French platform for the exportation of nuclear technology throughout the world. An economic wager, but also a new European foreign policy variable.

Guido Gentili is a columnist with Il Sole 24 Ore of which he was editor from 2001 to 2005. He was also formerly a columnist with the Corriere della Sera from 1996 to 1998 and editor of the weekly Il Mondo.

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OUR PAST, OUR MEMORY

THE WAY WE WERE

by STEFANO LUCCHINI

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1955 a remarkable year for Italy: borns the Fiat 600 and a new house organ

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The project on which the engineer Dante Giacosa had been working for the past five years was finally unveiled at the Palais des Expositions in Geneva on the 9th of March 1955. The Fiat 600 was born.

It was in that period that the tiny, lightweight yet robust four-seater utility car began to invade the streets of Italy, becoming a symbol of an increasingly urban country that after the gruelling years of the war and reconstruction was realising the dream of the consumer society.

In that same period, a young Italian-American, Mike Bongiorno, was preparing a television programme, Lascia o Raddoppia (the Italian version of The $64,000 Question), that in the autumn was to become another mass phenomenon with over 10 million Italians glued to their sets.

It was a remarkable year that 1955. Anything was possible, but it was hard to imagine that a major company would entrust the running of its house organ to a gentleman, Attilio Bertolucci, who was actually a poet by profession.

At least it would have been difficult had that company not been led by Enrico Mattei. The man who had disobeyed orders to liquidate Agip in order to transform it into Eni; that is to say, the driving force behind the industrial development of the period.

Mattei had a very clear idea of what he wanted. Bertolucci himself recalled as much in an interview from 1994: “He was very precise, ‘the magazine we’ll produce has to be the same, democratically possible; that is to say, readable, from the President of the Republic down to the most distant of our drillers.’ For the rest he agreed to the project I had described to him. Including the name. I told him I liked the definition of ‘Widlcat’, “Gatto Selvatico” that an American dictionary had applied to oil prospectors: adventurous men who were also frequently adventurers. The definition didn’t worry him ‘given the difficulty in finding oil’, he replied, ‘you need this wildcat on the job”.

38

A wildcat and a poet for Eni’s culture

before the pedagogue Alberto Manzi had begun to teach illiterate Italians to read and write, the magazine introduced Eni workers and their families to the new world of modernity that Italy was about to enter: from good manners (how to behave in restaurants, in queues, on the beach, on a train or in a supermarket…) to instructions on shopping, dance steps, photography, key films ad books, using domestic appliances and a part-work history of Italy and art. Through to definitions of neologisms such as “motel, economic boom and scooter” that accompanied the changing country.

Everything was changing…

A unique case in the history of publishing Over 50 years later, that periodical remains a special case in the history of Italian publishing, representing a happy and unrepeatable coming together of the world of business and the intellectual circles, together with Adriano Olivetti’s Comunità and Finmeccanica’s Civiltà delle Macchine, also the work of poet, Leonardo Sinisgalli.

A special case because Il Gatto Selvatico was many things: a periodical recounting company news, the latest foreign contracts and the ribbon cutting ceremonies at the opening of new plants and filling stations, but also a meeting place for writers, some of them such as Giorgio Bassani and Carlo Emilio

Gadda very well known, others such as Goffredo Parise and Natalia Ginzburg who had still to make their names. It began to publish their stories illustrated by the drawings of Mino Maccari. In those years the pages of the

periodical were graced by the names of the best writers and poets of the time: Berto, Bilenchi, Bevilacqua, Calvino, Caproni, Cassola, Comisso, Dessì, Gatto, La Capria, Pea, Sciascia, Soldati, Elemir Zolla.

Then there was the thread that tied Il Gatto Selvatico to a generation of journalists including Pietro Bianchi, Enzo Forcella and Bernardo Valli, who were also involved in the launch of Il Giorno, described by the Times as the first paper to break with “the traditional configuration imposed by the Corriere della Sera for 50 years.” Mattei was also behind the idea of Il Giorno, seeing it as a means of contrasting the private business sector that had had Eni and himself in its sights for years.

However, there was still more to Il Gatto Selvatico. Even

After Mattei’s death, Bertolucci’s literary laboratory remained active for some years, through to the December of 1964. It was no time for poets; under the influence of television language was changing rapidly and pressing new issues were emerging on the economic, political and social scene: the centre-left, the ’68 uprisings, the claiming of rights.

In 1972, during Girotti’s chairmanship, the task of creating a new periodical was entrusted to another “great” of Italian journalism, Gianni Rocca: Ecos, virtually an acronym of the E of energy with economy and ecology.

Sergio Ruffolo, who in 1976 was to design Eugenio Scalfaro’s La Repubblica, was entrusted with the graphics.

Thirty years later, with the collaboration with Italian writers having been extended to exponents from the countries in which Eni operated, Ecos gave way to Eni’s way.

Through to today, with a new adventure about to get underway, creating with the wealth of memories and the pride in a tradition “common ground for many people working in different places but united by common interests and common goals.” A place in which we can try to read the signs: because those who imagine the future sometimes make it.

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data

What matters the most is what is not there

B

As of 11-04-2008

Prezzo L3M Performance

28-02-2008 29-02-2008 3-03-2008 4-03-2008 5-03-2008 6-03-2008 7-03-2008 10-03-2008 11-03-2008 12-03-2008 13-03-2008 14-03-2008 17-03-2008 18-03-2008 19-03-2008 20-03-2008 21-03-2008 24-03-2008 25-03-2008 26-03-2008 27-03-2008 28-03-2008 31-03-2008 1-04-2008 2-04-2008 3-04-2008 4-04-2008 7-04-2008 8-04-2008 9-04-2008 10-04-2008 11-04-2008

Exxon Statoil Mobil Corp Hydro ASA

ENI S.p.A.

Royal Royal Dutch Shell Dutch Shell Class A Class B

BP PLC Chevron Corp

Repsol YPF S.A.

Total S.A.

$

NOK

€

in £

(£)

(£)

($)

(€)

(€)

(2,4%) 89.38 87.01 87.75 86.69 87.19 84.51 82.49 82.46 86.68 85.97 87.05 85.91 85.79 88.47 84.43 85 85 85.95 85.2 86.26 86.2 85.22 84.58 87.02 88.52 88.23 88.74 88.92 89.61 89.7 89.55 88.62

8,0% 162.4 160.9 159.5 159 158.6 158.4 156.1 151.6 155 157.1 155.9 153.4 149.8 151 149 149 149 149 151 151 152.7 153.5 152.6 155 157 157.2 157.3 162.6 163.3 161.7 164.4 164.6

(7,6%) 23.15 22.92 22.62 22.47 23.35 23.04 22.59 22.38 22.82 22.54 22.17 22.11 21.44 22 21.68 20.87 20.87 20.87 21.34 21.41 21.64 21.59 21.6 21.82 22.14 22.33 22.53 22.8 22.91 23.17 23.36 23.09

(12,0%) 18.28 18.09 17.71 17.39 17.74 17.37 17.10 17.13 17.26 17.46 17.26 17.20 16.89 17.16 17.05 16.42 16.42 16.37 16.83 17.06 17.07 17.12 17.43 17.53 17.55 17.75 18.04 18.21 18.39 18.55 18.60 18.52

(12,1%) 18.04 17.81 17.42 17.06 17.4 17.01 16.68 16.75 16.82 17.08 16.87 16.88 16.46 16.8 16.57 15.98 15.98 15.98 16.38 16.57 16.63 16.59 16.96 17.05 17.11 17.46 17.69 17.95 18.07 18.28 18.27 18.2

(8,4%) 5.48 5.46 5.405 5.36 5.47 5.345 5.285 5.34 5.385 5.455 5.34 5.295 5.1 5.19 5.115 4.96 4.96 4.96 5.15 5.155 5.12 5.03 5.12 5.12 5.205 5.225 5.28 5.355 5.37 5.455 5.5 5.47

(2,3%) 89.02 86.66 87.2 86.73 88.79 87.8 85.26 84.73 88.16 86.73 87.04 85.34 84.19 86.12 81.89 83.21 83.21 84.01 84.54 84.96 84.4 84.5 85.36 86.74 87.51 87.72 88.05 88.27 89.28 89.95 89.6 88.8

(2,3%) 23.08 22.85 21.99 21.15 21.72 21.19 20.89 20.95 21.79 22.16 22.54 22.52 21.58 22.35 22.08 21.86 21.86 21.86 22.46 22.43 22.52 22.27 21.86 22.46 23.49 23.45 23.8 24.45 24.43 24.04 23.92 23.53

(14,4%) 50.42 49.99 49.6 48.88 49.69 48.78 48.16 48.13 48.78 48.99 48.35 47.95 46.06 47.31 46.86 45.83 45.83 45.83 46.87 46.96 47.19 46.91 47.04 47.71 48.5 48.97 48.63 48.9 49.2 49.85 49.955 49.05

tic relation in the day to day price "reactions" of different companies' shares may be, if not beginning to break up, at least to loosen slightly. To a degree, this is an optical illusion since the three month chart where this is most evident tends to show pricing with a finer grain than a 12-month graph that packs four times the data points into a single image. Still, there are early indications that the stock market may be becoming slightly more selective in its perception of these shares. That could be good news for those companies who are perceived by the stock markets as the most efficient operators.

Why now though? The stock markets have been on the whole quite generous with hydrocarbons shares over the last eighteen months or so in the face of the spreading perception that "new buyers" in China and India above all will keep demand high for the foreseeable future. This has become something of an article of faith and is reflected in the steadily rising "long curve" most evident over the last year. There is though also a shorter curve in action, one of a very dif-

ferent sort.

America's "sub-prime" disaster first started coming to light not quite a year ago, though the danger was not fully appreciated at the beginning. As its effects became clearer over time, they began to drive investors out of the equity, bond and real estate markets.

Forex effects became paramount on the international level, with the dollar driven to new and dramatic lows. As all these negative factors churned through markets, investors liquidating positions found themselves with cash on hand that still had to go somewhere. Much of this liquidity drifted into investments in commodities, still showing positive prospects and backed by concrete and comprehensible assets, the commodities themselves, rather than by barely understandable instruments based on the creative repackaging of risk.

Petroleum is the king of all commodities and absorbed in consequence at least its fair share of the liquidity looking for a new home. And it did this as the currency in which most hydrocarbons commerce is conducted - the dol-

lar - began to weaken dramatically.

The upshot has been that today more than ever the "chips" with which the great game of international finance and commerce is played are, in the last analysis, based on oil. More than gold and certainly more than dollars, the world’s "reserve currency" is today petroleum. It holds value because it is value. If you find yourself backing a player in a game like that, one where all stakes have suddenly risen to spectacular new levels, wouldn't you want to be certain you were fielding the best possible team? Just having the right cards is no longer enough. More than ever, investors need to know who is playing them.

James Hansen is a consultant for large Italian groups in financial communications and international relations. He is American, and came to Italy as vicecounsellor, responsible for economic affairs at the USA General Consulate in Naples. He became a correspondent for a number of major newspapers, including the International Herald Tribune. He subsequently held the role of spokesman for Carlo De Benedetti and Silvio Berlusconi, before becoming head press officer at Telecom Italia.

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ut if investors are looking obsessively for tiny pricing differences, what is most remarkable about these graphs are not the variations they show at all, but rather the stunning similarities.

By stripping out purely financial factors which depend more on foreign

by JAMES exchange mechanisms HANSEN than they do on the demand for energy, what is revealed is the extraordinary lock-step in which the share prices of the oil majors all march. A blip in the price of one, however tiny - at least at this level of "magnification" - tends to be a blip in the price of all the others.

This is because stock market pricing tends to overwhelming reflect a single external factor that, simplifying greatly, investors appear to believe Careful investors are much addicted to studying charts like those shown below, which show the pricing on the world’s stock markets of the shares in leading oil companies over the last year (2007) and then over the last three months.

They hope to tease out tiny differences in the curves that will help them optimize their investment strategies.

What at first might appear most significant in these graphs - the horizontal "banding" which seems to group certain companies together - is the factor that matters least. Since our purpose is to look at the broad dynamics of the markets as they affect hydrocarbons companies, we have left the quotations in their original currencies. Otherwise the effects we're looking for would have been swamped by exchange rate phenomena like the slippage of the American dollar, in which Exxon and Chevron are quoted, against the euro (Eni, Repsol and Total), the pound sterling (BP and Shell) and Norwegian kroner (Statoil).

This approach does create one dangerous illusion. The more currency units in a share price, the more apparent movement is amplified. Statoil, whose price is quoted in a currency the kroner - with a low unit value, appears to be all over the map. In fact it is not has an essentially similar impact on each hydrocarbons operator. That is the commodity price of petroleum.

This view has the effect of sharply discounting the relative quality of single firms and their management.

What is interesting is that there are the barest hints here that this nearly sta-

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data

The oil market

Preparing for the unthink he oil market seems to be possessed by an unstoppable frenzy of rising prices. Rather like an explorer who, having verified the consistency of the ground, strides confidently towards an unknown goal, so too has the price of crude, after a brief spell at

by GIAMPIERO MARCELLO the hundred dollars per barrel mark at the Office Studies Eni end of last year, remained at three digits. In 2004 it was said that surpassing the fifty dollars

per barrel threshold would imply dire consequences for the world economy.

However, nothing has happened. The same admonitions were repeated when hundred-dollar barrels appeared on the horizon. Should we conclude that nothing will happen this time also? Perhaps it’s too early to tell, but up to now at least, no satisfying answer has been forthcoming, neither about the consequences nor about the reasons that have led to the status quo. We seem to have run out of simple explanations. The Iranian nuclear question? The depletion of oil resources? The latest theory is financial speculation driving prices where-

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ver it likes, well beyond anything that basic supply and demand could justify. Still, with last summer’s financial market crisis – which arose from subprime loans, the until-recently littleknown market of mortgages for less trustworthy clients – even high-powered finance no longer seems almighty.

According to some statistical analyses, these “speculators” are supporting the market more than anticipating and driving it, and perhaps accentuating the price fluctuations with an “avalanche effect” that is inevitably triggered by their actions. International political news reports have almost become monotonous, as all the news

CRUDE PRICES Brent futures at 1 month (weekly averages)

Source: ICE

110 100 90 80 70 60

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27-12-2004 27-01-2005 27-02-2005 27-03-2005 27-04-2005 27-05-2005 27-06-2005 27-07-2005 27-08-2005 27-09-2005 27-10-2005 27-11-2005 27-12-2005 27-01-2006 27-02-2006 27-03-2006 27-04-2006 27-05-2006 27-06-2006 27-07-2006 27-08-2006 27-09-2006 27-10-2006 27-11-2006 27-12-2006 27-01-2007 27-02-2007 27-03-2007 27-04-2007 27-05-2007 27-06-2007 27-07-2007 27-08-2007 27-09-2007 27-10-2007 27-11-2007 27-12-2007 27-01-2008 27-02-2008

50

Over the last three years the price of crude has alternated increase phases with decrease phases, maintaining an increase trend in the background. This graph shows weekly quotes on the basis of futures contracts first position on Brent crude, as its prices represent the most important marker in the world oil market in the composition of sale-purchase contracts for crude.

CRUDE PRICE AND MAJOR EVENTS DOLLARS/BARREL (annual averages) 80 70

1985. Opec production decreases to 15,7 Mb/d.

Saudi Arabia increases production unilaterally

1971. Start Opec nationalization 1979.

Islamic revolution in Iran

60 50 40 30

1974. Opec increases official price

20

1.7 0 1970

23.7

29.2

1986. Official prices of crude oil system is abandoned

2.8 1973

36.0

1976

1979

1982

15.8

14.4 14.9

1985

2005. Katrina hurricane struck 72.5 the Gulf of Mexico 2004. Opec abandons the 22-28 $/bl range of Opec basket price 2001. Attack on the Twin Towers

1997. Opec increases production in Jakarta

20.7 20.0

1.0

10

1990. Iraq invades Kuwait and threatens 1994. Record Saudi Arabia increase of 900 Kb/d in production 1988. Brent of North Sea succeed as crude marker 1991.

Iraq is defeated 27.5

1980. The war starts

1973. 4° Arab-Israeli war.

Embargo against U.S.

1996. Venezuela opens to foreign companies after the nationalization of 1975

19.1 12.7

24.5

54.4

28.8

2003. U.S. military interven17.9 tion in Iraq 1999. Opec cuts production

1998. Crisis in Asia

1988

1991

1994

1997

2000

2003

2006

Source: IEA spot price of Arabian light (1970-1985); IEA Brent spot price (1986-1987); PLATT’s, Dated Brent spot price (1988-2007)

Crude prices movements are often associated with major international political and economical events.

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is bad. The instability in the Middle East appears to be chronic and at very high levels of tension. There is an abundance of oil there, but the international companies can only operate in a limited fashion. Exploitation of national resources is a delicate political subject for public opinion in those countries. Without investments, however, there cannot be an increase in the unused oil production capacity, which intervenes whenever supply side problems arise, such as an accident or sabotage to oil facilities. Today that safety margin has diminished and is mainly in the hands of Middle East countries that are members of Opec,

Due to the two oil shocks of the 1970s there was a changeover from oil to nuclear fuels oil consumption collapsed and nonOpec production increased rendering a large part of Opec’s capacity redundant an organization made up of the main oil exporters. This has not always been so. In the eighties, unused production capacity was much higher, due to causes not planned by producers. Due to the oil shock of the 1970s there was a changeover from oil to nuclear fuels, oil consumption collapsed, non-Opec production increased, rendering a large part of Opec’s capacity redundant. With the collapse in oil prices in 1986 (the counter-shock) investments languished during the 1990s, until the surplus capacity was reabsorbed. Now we fervently wish that Opec producers would make investments to rebuild that surplus capacity. However, a simple economic reason poses an obstacle. Why invest to increase oil profits, when these grow beyond the wildest imaginings without doing anything? Just the price increase that has taken place over the last decade has conveyed such financial resources to the producing countries that they will shortly overtake the absorption capacity of their own economies. The oil production secretary of a producing country and the

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a CRUDE PRICE IN CURRENT AND REAL DOLLARS (annual averages)

nkable

80 dollars/barrel Real price deflated with export prices from industrialized countries Sources: for crude price see graph 2; deflator: IMF

70

Crude price in current dollars

72.5 65.1

Crude price in real dollars

60

54.4

50

state-owned company that is their operations agency do not reason like a private company. Priorities are different. For the governments of Saudi Arabia, Kuwait, and the United Arab Emirates, oil is a resource to be used for the benefit of future generations.

The knot tied on the oil market will not be easily untied. We are in a turbulent era, in which traditional points of reference are disappearing. There are opportunities but also risks. The single escape hatch is observing facts with an unprejudiced mind, and to be ready for the unthinkable.

40 30 20 10

38.2

36 34.2 31.7 30.1 29.2 28.127.5

23.7 20.7 19.1 17.9 18.5 18.2 20 19.3 17 17 15.8 14.4 14.9 12.7

12.9 1.4 1.0 1.612.6

1.8 2.1 2.5 2.8 0 1970

1975

28.8 28.4 24.5 25

1980

1985

1990

1995

WORLD CONSUMPION OF OIL

80 dollars/barrel

as percentage of oil world oil consumption 18%

100

16

90

non OCSE countries

80

OCSE

Unused capacity/ world consumption

60

2005

14

Crude oil price

12

50

millions of barrels per day

Source. Eni compilation of IEA and ONU data

70 60

10 50

40 8 30

40

6

30

20

4

20

10

2

10

0

0

0 1970 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2000 02 04 06

Sources. Crude oil price: graph; unused production capacity us a percentage of world consumption: Eni

We have observed in the past an inverse relationship between the price of crude oil and, at world level, the unused production capacity for crude oil as a percentage of oil demand. It should be pointed out that this is a relationship that can be applied in an exact manner.

1970 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2000 02 04 06 World consumption of oil has not always increased. By the end of the 1970s, after two oil shocks, there was a slowdown period, and then it went down from more than 6 million barrels/day in just over four years, from 1979 to 1983. Over the last years the consumption from OCSE areas have not increased, but they have gone down, although not by much.

LONG NET POSITIONS AND FUTURES PRICE FOR WTI 120

number of open contracts

dollars/barrel

150,000

(weekly values) Source: NYMEX; Eni elaborations

100

100,000

80 50,000

60 0

40 Long net positions of non commercial operator

20

-50,000

Futures price at one month for Wti 2006

2007

2008 -100,000

4-01 8-02 15-03 19-04 24-05 28-06 2-08 6-09 1-10 15-11 20-12 24-01 28-02 4-04 9-05 13-06 18-07 22-08 26-09 31-10 5-12 9-01 13-02 20-03 24-04 29-05 3-07 7-08 1-09 16-10 20-11 25-12 29-01 4-03

0 2005

The graph shows the net positions of non commercial operators at NYMEX (New York Mercantile Exchange) in relation to future contracts for WTI crude (Crude oil light sweet) and the futures price trend at one month for the WTI as of 2005. Such data is collected weekly by the CFTC (Commodity Futures Trading Commission) and are concerned solely with futures contracts. Non-commercial operators are those that have no ties with the raw material and take up positions in the futures market solely for speculative purposes, on the basis of certain price expectations. Hedge funds, pension funds, investors that diversify their portfolio in the commodity markets and other financial operators are among the non-commercial operators. In the terminology of financial markets an operator goes “long” when he buys futures contracts, and goes “short” when he sells them. Long net positions are obtained from the difference between “long” positions and “short” positions.

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PRICE AND UNUSED CAPACITY OF CRUDE OIL

70

2000

The price of crude oil in real terms has left the levels reached in the 1970s far behind. In this graph the price of crude is shown in relation to the price of exports from industrialized countries, which are also the main buyers of the crude oil traded on the international market and the main suppliers of goods and services for oil exporting countries.

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press release from Italy

Quotidiano.net 2 march 2008 Ahmadinejad in Iraq: first official visit after 30 years

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Mahmoud Ahmadinejad has been received in Baghdad by his Iraqi counterpart Jala Talabani. This was the first official visit by an Iranian president to Iraq since 1979, when the two countries went to war for the next eight years.

La Repubblica 11 march 2008 Goldman Sach banks on black gold reaching $200 a barrel within the year In January the idea of crude oil at $200 a barrel was but a figure written on the options contracts with which the operators protect themselves against extreme

events and which become so much waste paper should that event not occur.

Things are different now and crude oil at $200 has become a serious hypothesis for analysts. The experts at the Goldman Sachs merchant bank claim that if the American economy starts growing again or supply problems crop up the price may rise as high as $150-200 a barrel.

15 april 2008 A full tank in the country, from the oil tree Petrol from trees. Energy from fields and forests without depriving anyone of their daily bread and without sending cereal prices sky high. The proposal comes from researchers at the University of MassachusettsAmherst. The secret ingredients in this virtuous process are waste products.

The second-generation biofuels are obtained through flash pyrolysis: after being dehydrated and chopped, the biomass is heated at high speed to

break down its molecules.

Oil produced in this way can then be treated for use as a liquid fuel. Environmentally impeccable, the process will take another ten years or so to come to market.

Staffetta quotidiana 19 march 2008 Political crisis in Kuwait Following the mass resignation of all the ministers in opposition to the approval of a rise in monthly salaries decreed by parliament, Sheikh Sabah IV dissolved the assembly and called an early election for the 17th of May.

Apcom 18 march 2008 Women at the wheel in Saudi Arabia The council of the Wahabita

The Shock Economy Title: Shock Economy Author: Naomi Klein Publisher: Rizzoli Data: 2007, 624 pages Price: € 20.50

ollowing the great success of No Logo (2002), adopted by the noglobal movement as their manifesto, Naomi Klein returns with her latest book The Shock Economy: The Rise of Disaster Capitalism. The text “debunks the myth of the pacific and democratic triumph of the free market economy”: from the war in Iraq to Hurricane Katrina that devastated New Orleans, Klein describes the doctrine exploiting public disorientation in the wake of great collective shocks (wars, terrorist attacks, natural disasters) to impose unpopular and undemocratic economic measures, a strategy also described in The Shock Doctrine, a short film by Alfonso Cuaron and Klein herself and presented at the Venice Film Festival. “I started researching the free market’s dependence on the power of shock four years ago, during the early days of the occupation of Iraq,” writes the

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kingdom has approved a motion authorising women to drive cars between 7 am and 8 pm. They must, however, be aged over 30, have the consent of their muharrim (male tutor: father, brother or husband), be wearing veil and have no make-up. The driving license will only be issued after a cash deposit is made to cover eventual damages.

author in the introduction. “I reported from Baghdad on Washington’s failed attempts to follow "shock and awe" with shock therapy... Afterwards I travelled to Sri Lanka, several months after the devastating 2004 tsunami, and witnessed another version of the same manoeuvre: foreign investors and international lenders had teamed up to use the atmosphere of panic to hand the entire beautiful coastline over to entrepreneurs who quickly built large resorts, blocking hundreds of thousands of fishing people from rebuilding their villages.” When Hurricane Katrina then struck New Orleans, continues Klein, "it was clear that this was now the preferred method of advancing corporate goals: using moments of collective trauma to engage in radical social and economic engineering.”

Il Sole 24 Ore 18 march 2008 The Energy Intelligence Prize goes to Scaroni The Eni Managing Director, Paolo Scaroni, is the winner of the 2008 edition of the prestigious “Petroleum Executive of the Year” prize awarded by Energy Intelligence in collaboration with the International Herald Tribune. Scaroni thus becomes the first Italian to receive the sought-after award, universally held to be the oil industry’s most

important. Each year, the Petroleum Executive’s award goes to the manager who, in the opinion of his peers, has made the greatest contribution to the oil industry.

20 march 2008 Marghera rediscovers chemicals After eight years of vetos, the environmental redevelopment of Marghera, the site of an Italian chemical industry cluster, is finally due to get underway.

The ministerial cabinet has authorised the balancing of CVM and PVC production requested by Ineos Vinyl, the leading European PVC producer, automatically conceding the environmental impact valuation that the Ministry of the Environment had effectively blocked for years.

Ineos has invested heavily in Marghera over the last two years (over 60 million Euros) and had given the government an ultimatum, threatening to move its business elsewhere. With this authorisation, work will

Earth in the Balance Title: Earth in the Balance Author: Al Gore Publisher:

Bompiani Data: 2008, 564 pages Price : € 21.00

he Earth’s ecological balance can only be saved by a radical revision of our relationship with nature. A revision that in concrete terms is still a long way off. Al Gore, who received the Nobel Peace Prize in 2007, explores the full breadth of ecological thinking to present data and theories on the development of the earth and its pollution and tackles pressing problems such the greenhouse effect, the demographic explosion, the sustainability of various lifestyles, energy resources, desertification and the melting of the glaciers and rising sea levels. According to the former vice president of the United States (19932001), “the climate crisis also offers us the chance to experience what very few generations in history have had the privilege of knowing: a generational mission; the exhilaration of a compelling moral purpose; a shared and unifying cause; the thrill of being forced by

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circumstances to put aside the pettiness and conflict that so often stifle the restless human need for transcendence… In the past we faced and we accepted other great challenges.

We gave women the right to vote. We cured polio and contributed to the eradication of small pox. We set foot on the moon. We have already resolved a global environmental crisis, the hole in the ozone layer, because Republicans and Democrats, rich nations and poor nations, businessmen and scientists united to find a solution.” For Al Gore it is clear that the environmental crisis is rooted in every aspect of human society and that the response should be commensurate with the gravity of the situation. What is required is unprecedented global mobilization that also impacts demographic trends, technological choices and education.

“We can no longer wait to put an end to this crisis,” writes the author. “We have all the indispensable tools, with the exception of perhaps one: what is missing the necessary political will to bring about real change. But thanks to God, in our democracy, political will is a renewable resource.”

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and from the world begin on technological innovation and safety and territorial safeguarding projects.

20 march 2008 The oil industry majors meet in Baghdad Thamir Ghadhban, the energy adviser to the Iraqi premier has announced that the government will pay between 2 and 2.4 billion dollars to five major foreign oil companies in order to increase production of crude oil by half a million barrels a day. Each of the companies will be assigned an oil field with a two-year technical contract. It is not yet clear whether the payment will be in oil or cash.

The Duma has approved legislation dictating limits on foreigners wishing to invest in strategic areas of the Russian economy. The 42 sectors considered to be strategic account for over half of the country’s GNP. They include: nuclear

4 april 2008 Chavez’s crude oil more expensive The Venezuelan government has put a fiscal bite on the earnings of the oil industry majors. From the 1st of May 2008, whenever the price of black gold exceeds $70 a barrel, new tax rates will come into force. The rate will be 50% when the price of crude oil is between $70 and $100 a barrel and 60% once the $100 threshold is exceeded. The new taxes

will also be applied to the national oil company Pdvsa.

9 april 2008 Eni technology for Egypt Eni has signed a memorandum of understanding with Egas, the Egyptian gas company, and Eehc, the company managing electrical energy, for a feasibility study regarding the application of latest generation technologies to a number of Egyptian electrical power stations. The new technologies will bring environmental benefits and will permit energy savings of between 20 and 50% Part of the gas saved will be destined to covering the costs of the implementation of the project.

15 april 2008 Syria, Beijing finances a refinery The Syrian Oil Ministry has signed an agreement with the Chinese CNPC company to build a 100,000 barrels/day oil refinery in Abu Khashab a Deir el-Zor, by 2011. Under the

agreement, the Chinese company will cover up to 85% of the construction cost, compared with 15% from the Syrian partner, while Beijing will examine the possibility of financing the Syrian contribution through a loan to Damascus.

17 april 2008 Energy, the Japanese government blocks Tci “A question of national security”: Japan’s government has blocked the attempt by a British investment fund to double to 20% its current 9.9% share in the J-Power energy distribution company and power wholesaler, which is about to build a nuclear plant. According to some analysts, this is another demonstration that the Japanese market is not truly open to foreign investors and that the local authorities take a poor view of the activities of the international funds.

Corriere della sera 26 march 2008 Emirates: 100 million dollar project for the first Arab nuclear state The United Arab Emirates could be the first Arab state to get itself a nuclear programme. The government has, in fact, approved the investment of 100 million dollars in a national agency for the development of nuclear energy and in January signed a cooperation treaty with France. The Emirates claim they need nuclear energy for the desalinization of water and to produce electricity without drawing on their proceeds from oil , of which they are the world’s 8th largest producer and 3rd largest exporter.

3 april 2008 Eni-Gazprom, closer cooperation Eni and Gazprom have exchanged non-Italian

book

The Energy Rebus Title: The Energy Rebus: Politics, Economics and the Environment Author: Alberto Clò Publisher: Il Mulino Data: April 2008, 194 pages Price : € 15.00

he Asian countries with their increasing hunger for energy and climate change, the gas pipeline wars and crude oil breaking the 100 dollars a barrel price barrier: elements of an energy challenge that is increasingly becoming an acutely

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political question affecting both national security and international relations between consumer and producer nations. This book by Alberto Clò, a leading Italian energy expert, tackles this problem in the awareness that there are no easy solutions and that in any case the field needs to be swept clear of the usual clichés: the market is capable of curing all ills, that fossil fuels are about to run out, that renewable energy sources are a universal panacea, that a return to nuclear power is just around the corner, that saving energy is more virtuous than producing it (while reserving the right to protest when it is scarce).

Liquid Sun Title: Liquid Sun Author: Edward

Moor Publisher: Ellin

Selae Data: 2006,

318 pagine Price: € 14.00

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lternative power sources and their apparent inadequacy to replace fossil fuels, the interests linked to oil control and the geopolitical power arising from it, the innovative projects for exploiting renewable sources and their evident application limits, the effects of climate changes and its causes: all these subjects are the background to the riveting plot of this novel, translated for the first time into Italian.

“With All Possible Energy” Title: “With All Possible Energy” Author: Leonardo Maugeri Publisher:

Sperling & Kupfer Data: 2008, 288 pages Price: € 20.00 he problems and prospects of available energy sources is the theme of With All Possible Energy, the latest book by Leonardo Maugeri, Eni’s director of strategies and development and one of the world’s leading experts in the sector. Oil, nuclear, coal, sunlight, biofuels, hydrogen, water, natural gas: the author illustrates problems and prospects relating to each energy source, helping to deflate myths and dent mistaken convictions.

Maugeri analyses the problems and developments regarding these sources in a simple, straightforward language that takes nothing away from the scientific rigour of the research.

According to the author the great challenge facing our century is that of overcoming our excessive dependence

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on fossil fuels (oil, coal, gas), the combustion of which pollutes the planet while providing over 80% of global energy needs at relatively low costs. In order to escape this “energy trap” Maugeri suggests a series of realistic and stringent solutions, identifying efficiency as the only possible short-term path, while in the long term only scientific research holds out any hope of freeing us from the traditional sources of energy. The conclusion reached by the author is that thanks to technological development in the future the solution should be solar power. The book is published by Sperling and Kupfer and has been on the shelves since the 26th of February 2008.

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22 march 2008 Moscow pegs foreign investments

energy, natural resources, defence, aviation, the space industry, telecommunications, and the media. Under the new regulations a company controlled by a foreign government will be unable to obtain control of a Russian enterprise in these sectors, while a private company wishing to obtain a holding of over 50% will require the authorisation of a special committee presided over by the Prime Minister Vladimir Putin. The legislation does not affect licenses already obtained.

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press release from Italy assets. The agreement between the two gas colossi was reached during a series of meetings in Russia within the ambit of which the powers that be at Eni, Enel and Fineccanica were received by Vladimir Putin.

In particular, the agreement will involve firstly Libya where Eni has been present for some time and then Egypt. During the course of the meetings the creation of an Italo-Russian bank was proposed on the initiative of Intesa-San Paolo. The new bank will serve to assist small and medium business, but could also have a role in major energy projects.

and 50% by Eni (with a one-third share held by Korea’s Knoc). The Italian group is expected to sell its stake under the terms of the transaction agreed a year ago with Gazprom when Eni purchased a series of assets from the former Yukos company.

Dal mondo

Chavez and Ignacio Lula da Silva, nor the functionaries of the Chinese government, but rather the secretary of state of the Vatican, a traditional enemy of Communism and critical of the abuse of human rights on the Caribbean island. The decision to initiate his mandate by meeting Cardinal Tarciso Bertone represents a possible opening towards Europe and the United States and reflects an intention to put ideology to one side in order to achieve the objectives that his brother frequently only illustrated.

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18 april 2008 Eni pact with Gazprom.

Exchange on Libyan wells An Eni-Gazprom swap in Libya. The group led by Paolo Scaroni could grant the Russian giant a share of the Elephant maxi-field, one of Libya’s largest with production of close on 140 barrels/day last year. The reserve is currently controlled 50% by the Libyan State company Noc

The New York Times 27 February 2008 Raul Castro hints at change, but Cuba remains cautious

The Wall Street Journal 27 February 2008 Gazprom enters the coal business

During his first official outings as president of Cuba, Raul Castro met neither the most radical South American leaders such as Hugo

Gazprom, the world’s leading producer of natural gas, has announced the acquisition of Suek, Russia’s largest coal producer. The agreement involves an

Stories from Eni Title: Eni. Stories

from inside the company’ Author: Marcello Colitti Publisher: Egea Data: 2008, 280 pages Price: € 14.00 he life of a company as narrated by one of its employees. This, in short, is the story told by Marcello Colitti, who joined in Eni in 1956 in the economic studies service before moving on to other top roles including the vice presidency of Agip, Enichem and Ecofuel. Colitti’s account highlights how

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Publisher: Fabiano Data: 2007, 360 pages Price: € 8

idos is the first Italian magazine dealing with subjects linked to the measurement of consumption of electric power, gas, water and heat; the publication caters to the needs of a strongly fermenting sector, both in the production and regulation, with “market” implications dictated by the liberalization of guidelines on gas and electricity and of the new trusts for managing hydro resources, an area which in the coming years will attract the attention of players both old and new.

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15 april 2008 No more long-term contracts on Algerian gas With energy prices at record levels, Algeria has announced plans to abandon long-term contracts in order to boost revenues from its natural gas reserves.

The Algerian Oil Minister and OPEC chairman, Chakib Khelil, has explained that he will not be signing any further long-term gas contracts but will instead be focusing on short-term agreements, to enable the producer country to renegotiate gas prices every two years. Algeria supplies more than 11% of the natural gas consumed in the European Union and is one of the largest producers of liquefied natural gas.

Plan C

Eni’s history mirrors that of Italy. This is because through its provision of low cost energy, the energy group took on the task of encouraging Italian economic take-off in the early ’60s. However, Colitti’s book also portrays a man who has conducted his career as a mission, as a desire to serve the company and participate in the regeneration of his country. The author also talks of Eni’s ‘double soul’ in those years, with the more intellectual and leftwing study service contrasting with more industrial and ‘Western’ thinkers. These two souls, recounts Colitti, were perfectly summed up in Enrico Mattei. The exmanager’s book therefore profiles Mattei as well as his successor, Eugenio Cefis.

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exchange of assets that will extend Gazprom’s business on the electricity market. The strategy is that of incrementing domestic use of coal in order to have more natural gas to export.

The stock market debut is planned for the fall.

Title: Plan C: Community Survival Strategies for Peak Oil and Climate Change Author: Pat Murphy Publisher: New Society Publishers Data: Soon to be published (June 2008) Price: $ 13.57

t a time when public concern about climate change and the traditional power sources seem close to the beginning of their end, the solutions put forward from time to time often seem like panaceas but there is no hint of an

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16 april 2008 China buys 1% of BP Another move from China on the playing field of the main European oil companies. After its recent incursion into Total, Beijing has acquired a 1% stake, through a sovereign fund, in the capital of BP, worth approximately 2 billion dollars. The buyer is Safe (State administration of foreign exchange), the fund that previously acquired 1.6% of France’s Total. Why Safe is investing in BP and Total is not clear. Analysts say that since the Chinese government controls fuel prices on the domestic market, the move could be intended to balance the rise in oil prices, which is costing the government billions of dollars. Generally speaking, higher oil prices mean higher dividends at oil companies.

advent of changes to our lifestyles, which are the cause of all this. So holds Pat Murphy, the book's author and chairman of Community Solutions, a non-profit organization that provides information on new lifestyles based on the use of small amounts of energy. “Plan C” explores the risks incidental to continuing to live like we do today. The answer, according to Murphy, will not come about through technology or renewable sources, but only through personal change. This is the only way we can reduce carbon dioxide emissions. Energy saving must be applied to every aspect of our daily lives, starting from home and food and going on to include transport. By learning to live with less energy consumption, we will follow a more sustainable way of life.

This – according to the author – is what will save the world.

The black book of oil Title: The black book of oil Author: Seifert Thomas, Werner Klaus Publisher: Ed. Newton & Compton Data: 2007, 360 pages Price: € 9.90

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he authors probe the links between oil and politics, highlighting the great influence of lobbies in state decisions and describing current-day political and economic goals. The constant increase in the price of oil, the heavy use of power by the West and by China, the role of the United States and the new alliances to preserve diminishing resources.

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and from the world

El Universal 29 February 2008 Agreement Between Pdvsa and Eni for the Exploitation of the Junin 5 Block

Umaru Yar'Adua, Nigerian president, wants to raise $20bn from energy companies to invest in harnessing gas reserves to solve the country's chronic power crisis. In Nigeria power cuts are perhaps the biggest barrier to economic growth. The government may require producers to set aside as much as 25-30% of its gas for domestic use as well as hoping to increase exports to the USA, Asia and Europe.

14 march 2008 Russia and Ukraine end gas stand-off Ukraine and Gazprom have reached an agreement on natural gas supplies, putting an end to last week’s tense stand-off in which the Russian energy company had halved supplies to

3 april 2008 China buys $1.9 billion stake in Total The Chinese state has bought a 1.6 per cent stake in the French oil company Total for 1.9 billion dollars.

The purchaser is Safe, the body that manages China’s 1,650 billion dollars of foreign exchange reserves in the Asian country. According to certain sources Safe’s acquisition of the Total shares began some months ago through negotiations with representatives of the French company.

15 april 2008 Russia prepares for first fall in oil production in 10 years Five years ago, the rapid growth in Russian oil exports was seen as the cure for US and European dependency

on oil from the Middle East, the largest potential source of earnings for the international companies and the only solution to China’s insatiable thirst for energy.

Today, however, Russia is preparing for its first fall in production in 10 years: the first four months of 2008 closed with a 1% production decrease, bringing total oil output to 9.76 million barrels/day, compared with 9.87 million last year when production rose by 2.3%.

According to Leonid Fedun, deputy chairman of Lukoil, Russia’s largest independent oil company, over the next 20 years the country will be able to guarantee production levels of around 8.5-9 million barrels/day only if companies invest billions of dollars in working new fields.

17 april 2008 Nigerian oil production could fall by one third Nigeria risks losing one third of its oil production by 2015 unless it finds a way to boost investment in joint ventures with foreign energy companies. The warning

comes from an internal report drawn up by energy advisors to President Umaru Yar’Adua. Their analysis underlining the need for the government to provide funding for the national oil industry follows an internal memo at Shell observing that the financial problems of the Nigerian government are putting the country’s joint venture with the AngloIrish company at risk.

Al Quds Al-Arabi 29 march 2008 The Arab League divided 10 of the 22 members of the Arab League failed to participate in the meeting of representatives of the Arab countries in Damascus.

Among the absentees were Saudi Arabia and Egypt, which accuse the Syrian president Bashar Al Assad of obstructing the presidential election in Lebanon.

book

The plough, the plague, the oil Title: The plough, the plague, the oil Author: William

Ruddiman Publisher:

Università Bocconi Data: 2007, 260 pages Price: € 23.00

Chinese safari Title: Chinese safari.

Oil, resources, markets. China conquers Africa Author: Brighi C., Panozzo I., Sala I. M. Publisher: O Barra o Edizioni Data: 2007, 108 pages.

Price: €12.50

ccording to every theory recognized by the scientific community, the amount of methane and carbon dioxide in the atmosphere during the last 10,000 years should have diminished at least until the start of the industrial age. Instead, traces found in ice cores extracted from the Antarctic show that 5,000 years ago, methane began increasing for no apparent reason. With this feeble indication begins the scientific investigation of paleoclimatologist William Ruddiman which, in this book, shows how man even in pre-industrial ages had influenced climate by creating a higher concentration of greenhouse gases (carbon dioxide and methane) and therefore causing an increase in temperature.

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eijing is building a superpower future in Africa. This book is a journalistic, political and social survey of the ties between both areas, from the preambles during the Mao years and from “African socialism” until the present day, with the Chinese race for oil and underground riches. The story of the bilateral relationship and, perhaps, of a new form of colonialism, useful to understand the geopolitical reasons, economic impulses and social repercussions of a change in world balance that is making Africa the conquered land of Chinese capitals.

A hundred watts for the next billion years Title: A hundred watts for the next billion years Author: Luigi Sertorio, Erika Renda Publisher: Ed. Bollati Boringhieri Data: 2008, 144 pages Price: € 16.00

n essay on the subject of a future depletion of fossil fuels in a way still unheard of in Italy.

Midway between the catastrophe predicated by some ideological environmentalists and the perhaps too-optimistic vision of scientists and technologists, it upholds values that, although having old roots, seem quite new to our eyes: rationality, sobriety, responsibility.

Within a scenario in which the end of fossil fuels is taken for granted and the race to control natural reserves is increasingly rapid, the book unveils the anomaly of half a century of economic growth fed by resources that are finite by definitionAn energy reserve – that of fossil fuels – that was produced over hundreds of millions of years. In the case of oil, the production-

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accumulation rhythm has been 14 thousand tons per year. That’s two grams a year for each human being alive at present. Thus emerges the theory of the two authors Luigi Sertorio – a physicist and an expert on the subject – and Erika Renda, his collaborator: either we turn over a new leaf or it’s the end. The hundred watts that give the essay its name refers to the external power that each individual must add to the eighty watts of their own internal power. From this addition we obtain the energy required to maintain the current quality of life.

Before oil reserves are exhausted, should humanity wish to face its energy needs, it must necessarily use other energy sources that cannot be depleted and that do not pollute.

According to the authors a solution may be found through debate and dialogue between science, technology and ethics. And for the authors, another thing is certain: in post-oil times, energy can’t be anything but inexhaustible, while everything else will have to be recycled.

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Petróleos de Venezuela Sa (Pdvsa) and Eni have signed two agreements for the study, the certification and the quantification of the reserves in the Junin 5 block of the Orinoco River oil belt.

The groups will form a jointstock company, 40% owned

by Eni and 60% by Pdvsa, for the exploitation on an area of 60 km2 containing the world’s largest deposit of heavy oil, estimated at a total of 1,300 billion barrels of oil.

Financial Times 14 march 2008 Nigeria targets $20 billion investment in gas

Ukraine, a key transit artery to Europe.

The agreement removes controversial middleman companies from the multibillion dollar gas trade between Russia, Ukraine and central Asian gas suppliers.

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events in Italy GENOA

LONDON

“Energy Collapse” How to survive a few more centuries on this planet.

Shows events and conferences on the energy emergency in an attempt to spread accessible information on energy-related subjects and the promoting of public awareness about the need to adopt environment-friendly behavioural patterns.

When: from 10th to 25th May 2008 Info: www.teatrocargo.it

International oil trading When: from 16th to 19th June 2008 Info: tel: +44 207 779 8800; e-mail: customerservice@petroleumeconomist.com www.petroleumeconomist.com

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FLORENCE Future Earth 2008 A large exhibition-congress with the aim of promoting “good practices of life-style, government and business” to contribute to the safeguarding of environment and planet as well as protecting the rights of individuals and peoples.

When: from 23rd to 25th May 2008 Info: www.terrafutura.it

LECCE “Energy Festival – energy explained” In the streets and squares of Lecce the general public will have the opportunity to meet experts, scientists and journalists, for three days full of energy. The festival is organized by Aris (Agency for research, information and society) and Assoelettrica.

When: from 16th to 18th May Info: e-mail: segreteria@ festivaldellenergia.it

TURIN "Greenwashing – Environment: dangers, premises and perplexities" Greenwashing: a neologism which indicates how companies and politicians salve their consciences by participating in publicity and communications in favour of the environment to hide their own negative responsibility.

An awkward subject but a very topical one, which will be developed in many different ways by 25 artists under 40 in an exhibition of the Sandretto Re Rebaudengo foundation. The exhibition is organized by Ilaria Bonacossa and Latitudes.

When: until 18th May Info: Helen Weaver, tel. +44 (0)7772 159219 e-mail: helen.weaver@fondsrr.org

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SACRAMENTO VERONA “Solarexpo & Greenbuilding” Ninth edition of the exhibition and international meeting on renewable energy and distributed generation Under the patronage of the Ministry for the Environment.

Among this year’s novelties there is a special event.

POLYGEN, dedicated to high efficiency distributed generation, which will be held during Solarexpo: a specific area and a national conference at which more than 300 professionals participated in the past edition. Besides the exhibition there will be a prestigious convention programme including the inevitable consideration of photovoltaics, an in-depth analysis of solar thermal power and another on green building.

When: from 15th to 17th May Info: www.solarexpo.com tel. 0439 849855 0439.847652

ROME EAGE annual conference/SPE Europec This year, the 70th EAGE conference & exhibition has

‘Leveraging Technology’ as the principle subject under consideration. At the moment, while the whole E&P (exploration and production) industry is struggling to renew its global reserves and improve the yield of oil fields already in production, technology is seen more than ever before to be the only real key to success.

When: from 9th to 12th June at the New Trades Fair Centre, Rome, v. Portuense 1455 Info: www.spe.org o www.eage.org tel +39 06 5178582 Gas in Italy: what does the future hold?

Safe (“Sostenibilità ambientale fonti energetiche” – “Environmental sustainability: energy sources”) is organising a workshop on problems relating to gas. Speaking at the event will be representatives of industry institutions and associations, the scientific research world, and top company managers.

When: 19 May 2008, Camera dei Deputati, Palazzo Marini Sala delle Colonne, Via Poli 19 – Rome Info: e-mail segreteria@safeonline.it - Tel. +39 06/53272239 - Fax +39 06/53279644

2008 Sacramento World oil conference 2008 Aspo USA announces its fourth annual dialogue with the experts of the energy sector. A high-level conference to discuss the key issues, impact of and answers to a peak in world oil production.

Numerous experts and professors will be present to give their thoughts on the question. There will also be a pre-conference day where attendees will be able to mix and meet with speakers and sponsors.

When: 21-23 September 2008 1209 L Street, Sacramento, California, USA 95814 Info: Tel: +1 916 443 1234 Fax: +1 916 321 3099 http://www.aspousa.org/aspousa4/index.cfm

ISTANBUL 31st International IAEE Congress Hosted by the Turkish Association for Energy Economics (TRAEE), this congress will provide a platform for objective discussion at a professional level for all those engaged in the energy industry (such as researchers, entrepreneurs and suppliers). The event represents an opportunity to explore extremely topical energy related subjects, to consider global energy policies,

understand which factors will influence the sector in future years and assess the uncertainties of the market.

In 2008, the Kyoto Protocol enters into the first period of its application. The Congress will also discuss its implications.

When: from 18th to 20th June 2008 Info: tel: +90 212 3597544 e-mail: info@iaee08ist.org; http://www.iaee08ist.org

HOKKAIDO G8 Summit Japan will host the 2008 G8 at Hokkaido Toyako.

When: from 7th to 9th July Info: Internet: http://www.dosummit.jp/en/about/

VIENNA ENERGEX Congress & Exhibition Energy for human development and the protection of the environment Participants will receive up-todate information on all kinds of energy.

When: from 6th to 10th July 2008 Info: Sophia Waldmueller tel. +43 1 402 77 55 621 e-mail: energex2008@aimsinternational.com Website: www.energex2008.com

ALESSANDRIA EGYPT 5th Congress and Exhibition of Mediterranean countries When: from 20th to 22nd May 2008 Info: tel: +20 2 70 65 210; fax +20 2 70 65 359; e-mail: conference@moc2008.com; website: www.moc2006.com

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and worldwide shown that the volatile nature of prices and economic cycles which alternate periods of boom with periods of recession in demand are harmful both for industry and consumers. The challenge facing companies, in a changing world, is to ensure a continuous and reliable supply, which will meet society’s need for sustainable development from both an ethical and environmental viewpoint.

When: from 29th June to 3rd July 2008 Info: tel: +44 207 596 5233; e-mail:oilgas@iteexhibitions.com website: ite-exhibitions.com

TASHKENT

MADRID 19th World Congress on Oil The growth in world population and globalization have led to a phenomenal increase in energy consumption. The demand for oil and gas continues to increase. Past experience has

DUBAI Energy Iraq 2008 Focusing on the enormous incentives needed to encourage a favourable climate for investment in the Iraqi downstream. In the twoday congress the challenges to be faced by the Iraqi oil industry will be analysed.

When: 19th May 2008 Info: Tel: +44 207 978 000; fax: +44 207 978 0099; e-mail: sshelton@thecwcgroup.com; website: www.thecwcgroup.com Middle East Oil Strategy When: 26th May 2008 Info: tel: +44 207 589 7804; fax: +44 207 589 7814; e-mail: babette@glopac.com; website: www.petro21.com.

5° MidEast Upstream When: from 27th to 28th May 2008 Info: tel: +44 207 589 7804; fax: +44 207 589 7814; e-mail: babette@glopac.com; website: www.petro21.com.

mail: oilgas@iteexhibitions.com, website: ite-exhibitions.com.

1st International Congress and Exhibition on Nigerian Gas The Nigerian gas sector is going through a period of sustained growth and investment: in fact president Umaru Yar’Adua is determined to place the country in a stronger position on the gas market. This event offers an opportunity to interact directly with those responsible for the ongoing restructuring process in Nigeria as well as the companies in the sector already operating in the country.

When: from 20th to 23rd May 2008 Info: tel. +44 207 596 5233; fax +44 207 596 5106; email: oilgas@ite-exhibitions.com, website: ite-exhibitions.com

MIOGE 2008 MIOGE (Moscow international oil and gas exhibition) is the largest Russian exhibition on oil and gas. Its first edition was held in 1993.

When: from 26th to 29th June 2008 Info: www.mioge.com

6th meeting Maghreb – Mediterranean When: from 17th to 18th June 2008 Info: tel. +44 207 589 7804; fax: +44 207 589 7814; e-mail: babette@glopac.com; website: www.petro21.com

MOSCA 6th Russian Congress on Oil When: from 24th to 26th June 2008 Info: tel. +44 207 596 5233; fax +44 207 596 5106; e-

PARIGI Summit on Gas and Oil of the CIS (Confederation of Independent States) When: from 28th to 30th May 2008 Info: tel. +44 207 067 1800; e-mail: marketing@theenergyexchang e.co.uk; website: www.theenergyexchange.co.uk

ORLANDO 99th Annual Congress and Trade Fair District Energy/CHP 2008 When: from 29th June to 2nd July 2008 Info: Tanya Kozel tel. (410) 518-6676 e-mail: idea@districtenergy.org Website: www.districtenergy.org

TUNISI Briefing of Maghreb countries on oil and gas When: 16th June 2008 Info: tel. +44 207 589 7804; fax +44 207 589 7814; e-mail: babette@glopac.com; website: www.petro21.com

Info: tel. +44 207 596 5233; fax +44 207 596 5106; email: oilgas@ite-exhibitions.com, website: ite-exhibitions.com

BAKU 15th International Congress and Exhibition on oil and gas of the Caspian Over 400 congress participants, 20 sponsors and over 50 media partners. These are some figures regarding the event which will host commercial delegations from the United Kingdom, Norway, China, Finland, France, Germany, Italy, Turkey, Tassia, Kazakhstan, Turkmenistan and the US. When: from 3rd to 6th June 2008

Solwest Fair of Renewable Energy When: from 25th to 27th July 2008 Info: Jennifer Barker tel. 541-575-3633 e-mail: info@solwest.org Website: www.solwest.org

CHICAGO GASMART 2008 Market for buyers and sellers of gas When: from 20th to 22nd May 2008 Info: tel. 800–427–5747, e-mail: info@gasmart.com http://gasmart.com/gasmart2 008/

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12th Congress and International Exhibition on the Oil and Gas in Uzbekistan (OGU) Over the last 10 years OGU has grown significantly, to become one of the principle events in the Uzbekistan and CIS oil and gas sectors. Now, OGU represents a veritable launching pad for foreign companies wishing to enter the Uzbek market or invest in gas or oil in this country.

When: from 13th to 15th May 2008 Info: Tel: +44 207 596 5233 e-mail:oilgas@iteexhibitions.com, ite-exhibitions.com

ABUJA (Nigeria)

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May 2008