New Blog Location

Posted by: Steve LeVine on September 21

Please look for this blog at oilandglory.com

Thanks, Steve LeVine

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Report: Cyber-Attack Strategy Part of Russian Offensive on Georgian Pipelines

Posted by: Steve LeVine on August 20

John Bumgarner, a former cyber-security expert for the CIA and other U.S. intelligence agencies, is attracting much attention for his report concluding that Russia's military offensive in Georgia last year was coordinated with a pre-arranged civilian cyber-attack on the country. What appears to have gone unreported is Bumgarner's conclusion that the region's oil apparatus was a strategic target of the overall conventional-and-cyber offensive.

The 100-page report, conducted for the U.S. Cyber-Consequences Unit, where Bumgarner is director of research, was distributed to U.S. officials and security experts. Bumgarner and I chatted by phone, and he emailed me the nine-page executive summary (thanks to Josh Foust for agreeing to post it at Registan.net. Incidentally, Foust has a good piece on the media war between Russia and Georgia at CJR).

Bumgarner says the report is the result of an examination of hundreds of public Internet forums, sharing of data with sources at home and abroad, and his own reporting on the attack from almost the instant it began. Others have reported that much of the findings were already known; but Bumgarner's findings appear to be the difference between barstool talk and authentic data. Nor is the report on the kid-stuff such as carried out last week against 45 million Twitter users along with Facebook users, apparently by a Georgian blogger calling himself Syxymu (the blogger's attempt to Latinize the name of the Abkhazian capital, Sukhumi.).

Its chief takeaway is that the Russian cyberattack -- which disabled 54 Georgian websites in banking, communications and media with the apparent aim of reducing Georgia's capability of responding to the Russian offensive -- was prepared well in advance. Bumgarner writes:

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Exxon, the Chase for Reserves, and the Oil Sands

Posted by: Steve LeVine on July 30

Talking to corporate analysts over the several years that I've been back in the U.S. and covering oil, a recurring question I hear is how Exxon manages year after year without exception -- unlike its Big Oil rivals -- to replenish its cache of proven oil and natural gas reserves. That's what the company has reported in its news releases and annual reports for the last nine years -- an unbroken trajectory of replacing more than 100% of the oil and natural gas that it pumps out of the ground.

The answer is that it hasn't done so, not at least according to the rules of the Securities and Exchange Commission, which governs such matters. When you examine Exxon's annual filings for 1999-2008, the company has had a quite-normal -- for oil companies, that is -- four years of exceeding 100% replacement, and five years not. For instance, for 2008 the company issued a statement saying that it possessed 22.8 billion barrels of proven reserves; yet its 10-K filing with the SEC reported just 21.1 billion barrels in proven reserves (to get there, see page 7 of the 10-K, and tally up the developed and undeveloped reserves in the consolidated and equity categories).

So I gave Exxon a call. How do you get from 21.1 billion barrels to 22.8 billion barrels? I asked.

Add in the oil sands, was the reply.

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The Oil and Glory Interview: U.S. Eurasian Energy Czar Richard Morningstar

Posted by: Steve LeVine on July 16

Richard Morningstar talks much about déjà vu. In the late 1990s, then-President Clinton appointed him as Washington’s first special envoy for the Caspian Sea. Against strong headwinds, he attempted to persuade, cajole and muscle Big Oil into building the Baku-Ceyhan pipeline. A hostile BP, Exxon and other companies declared that they would love to build the line, but that there simply wasn’t enough oil. Russia said it might fire on any installations built in the sea. Time and new turmoil within the oil industry changed BP’s attitude, and the geostrategic pipeline became a fact in 2006. Today, after a decade teaching law at Harvard and Stanford, Morningstar is back in the same job. The task? To persuade not just companies, but also several countries to build yet another pipeline – a much-troubled natural gas line called Nabucco. He just attended a signing ceremony among five of the proposed transit countries in Ankara. O&G caught up with Morningstar by cellphone as he passed through the Frankfurt Airport on the way back to Washington.

O&G: Nabucco supporters argue that the pipeline is necessary because Russia uses or will use its dominance of the natural gas supply in Europe for political leverage. Is the argument valid?

Morningstar: That gets into why Russia does what it does. Does Russia play commercial hardball to get the best deal it can, or as a political weapon? I think that Russia does want to maximize its commercial benefit. The result is that sometimes it has political implications. The benefit of Nabucco is that it does provide diversity of gas supply to Europe. It does develop the Caucasus and Central Asia. Though Nabucco won’t cure Europe’s energy security, it will provide a natural gas source, especially for countries that were cut off during the disputes between Russia and Ukraine.

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Exxon: Late, But Always the Bride

Posted by: Steve LeVine on July 15

Exxon was late getting onto the Caspian in the 1990s, but it still ended up with pieces of prime real estate. On the Baku side, deputy Energy Secretary Bill White interceded to get it a piece of the offshore after Exxon stood on the sidelines while its rivals slugged it out. In Kazakhstan, even GOP heavyweight Jim Baker couldn't persuade Kazakh President Nursultan Nazarbayev to grant Exxon a piece of the ultra-supergiant Kashagan oilfield; Nazarbayev told Exxon the bidding was over. So Exxon simply bought Mobil Oil, which itself was one of the best old-fashioned horse traders on the Caspian and had grabbed huge slices of both Kashagan and Tengiz.

Yet none of that meant that Exxon had drunk the Kool-Aid on the Caspian. It was the only member of Big Oil present in Baku to refuse Clinton administration entreaties to help build the geopolitically minded Baku-Ceyhan pipeline.

It's a similar story with Exxon's announcement yesterday that it's investing up to $600 million in an algae-to-fuel venture with genetic biologist J. Craig Venter. I wrote about this for Business Week on-line today. Exxon waited until Shell, Chevron and others dipped their toes into algae, then dove in with Venter, the most famous private genomics scientist in the world.

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