Daily Archives: December 22, 2011

Iran’s currency collapse prompts fear of oil blockade, energy price spike

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Peter Goodspeed Dec 22, 2011

Iran’s nuclear push is rapidly turning into a game of chicken with the world’s economy.

Faced with the threat of growing international sanctions and unprecedented economic uncertainty — which has seen the value of its currency slashed in half in recent weeks — Iran announced Thursday that its navy will stage a 10-day naval exercise in the Strait of Hormuz starting Saturday.

The move, which increases the risk of military confrontation with the United States, may temporarily choke off world oil exports from the Middle East, drive up international energy prices and damage the global economy.

The head of Iran’s navy, Admiral Habibollah Sayyari told Iranian state television Thursday that Iranian submarines, destroyers, missile-launching ships and attack boats will occupy a 2,000-kilometre stretch of sea from the Strait of Hormuz, at the mouth of the Persian Gulf, off the southern edge of the Arabian Peninsula and into the Gulf of Aden, near the entrance to the Red Sea.

Dubbed Velayat-90, the naval war games will start Saturday and are designed to display Iran’s naval power in the face of growing international criticism of its nuclear program.

Earlier this week, U.S. Defence Secretary Leon Panetta predicted Iran will be able to assemble a nuclear bomb within a year and warned that the United States hasn’t ruled out using military force to prevent that from happening.

Hamed Jafarnejad/AFP/Getty Images

Habibollah Sayari points out locations for the war games Wednesday.

The day before Iran announced its war games, General Martin Dempsey, the Chairman of the U.S. Joint Chiefs of Staff, told CNN television that the United States is determined to prevent Iran from becoming a nuclear power.

“My biggest worry is they will miscalculate our resolve,” Gen. Dempsey said. “Any miscalculation could mean that we are drawn into conflict and that would be a tragedy for the region and the world.”

Iran says its naval war games will be held in international waters and Admiral Sayyari said there has been no decision yet on whether to close the Strait of Hormuz.

But last week Iranian Foreign Ministry spokesman Ramin Mehmanparast warned that “if the region faced a war-like situation, then everything would then become war-like.”

The Strait is a narrow 50 kilometre wide passageway through which about a third of the world‘s oil tanker traffic sails. A crucial choke point, it virtually controls Middle East oil exports.

The potential naval confrontation comes just as the United States and its allies are stepping up pressure to impose stricter economic sanctions against Iran in an effort to force it to abandon its controversial nuclear program.

In early November, the International Atomic Energy Agency issued a report that increased international fears Iran is deliberately seeking to develop atomic bomb capability and the United States and Europe immediately applied stronger economic sanctions against Tehran.

Those sanctions appear to be hurting Iran’s economy, squeezing the country’s banks and sending the Iranian Rial plunging to its lowest level against the U.S. dollar.

Washington recently declared the Iranian banking system guilty of money laundering, which has forced U.S. banks to step up the reporting requirements of banks they deal with which may be doing business with Iran. The impact has made life so difficult for foreign businesses that many have decided to stop dealing with the Iranians.

In November, Canada and Britain also decided to sever all ties with the Central Bank of Iran and France began calling for a European Union boycott of Iranian oil imports.

Earlier this month, the U.S. Congress passed the Iran Threat Reduction Act, which bans foreign banks from operating in the United States if they conduct transactions with the Central Bank of Iran.

The new array of measures have created a legal minefield for Iran’s trading partners and resulted in a significant reduction in business and investment. That in turn has sparked panic selling of Iranian currency, which has lost over 50% of its value in the past few months. The value of the rial has fallen by more than 15% since Tuesday.

As Iranian traders begin to use barter arrangements to avoid sanctions, long lines of Iranian citizens have been rushing to ditch their own currency and begun buying gold.

In the past, Iranian officials dismissed sanctions as doomed to fail, but earlier this week Iran’s Foreign Minister, Akbar Salehi was quoted in the official Islamic Republic New Agency as saying: “We cannot pretend the sanctions are not having an effect.”

The governor of the Central Bank of Iran, Mahmoud Bahmani, also told reporters that Iran needs to act as if it were “under siege.”

As Iran’s economy reels, it now appears to be trying to warn the international community it can take retaliatory steps that will reduce oil flows, drive up prices and damage the global economy, hoping that such moves may alienate other countries from following Washington’s lead.

It’s a dangerous game, because Iran itself depends on foreign oil sales for more than half its own government revenues.

National Post

Obama Hits Iran-Venezuela Ties. Now What?

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Posted By José R. Cárdenas

One certainly hopes that President Obama’s recent criticism of Iran-Venezuela relations indicates a new willingness on the part of his administration to confront the growing menace of the radical Islamist regime in the Western Hemisphere.

In comments submitted to the Venezuelan newspaper El Universal, the president said that Hugo Chávez‘s ties to Iran “have not served the interests of Venezuela or the Venezuelan people” and expressed concern about his anti-democratic behavior and his failure “to contribute to the security in the region.”

“Here in the Americas,” he said, “we take Iranian activities, including in Venezuela, very seriously and we will continue to monitor them closely.”

The president’s comments came on the heels of further explosive revelations on the extent of Iranian subversion of U.S. interests in the region.  Earlier this month, the Spanish-language network Univision aired an investigative documentary,“The Iranian Threat” — the product of months of research — that included incriminating information on Venezuelan and Iranian diplomats in Mexico discussing waging cyberattacks on sensitive U.S. computer systems, including those of nuclear power plants.

Shortly thereafter, U.S. law enforcement officials revealed details of an investigation into a Lebanese bank in Canada that laid out Hezbollah’s sophisticated global money-laundering operations that includes direct involvement by senior officials in the lucrative South American  drug trade.  The revelations put the lie to the State Department’s long-repeated talking point that Hezbollah merely “raises funds” in Latin America for its operations in the Middle East.

Both reports drew sharp reactions from Capitol Hill, where a number of members have expressed deep dissatisfaction with the direction of the administration’s regional policy.  Senator Bob Menéndez (D-NJ), Chairman of the Senate Foreign Relations Subcommittee on the Western Hemisphere, said he would hold hearings on Iran’s destructive role in the region when the Senate reconvenes in 2012.

House Foreign Affairs Chairman Ileana Ros-Lehtinen (R-FL) said she would request the State Department to conduct its own investigation “into Iran’s deeply troubling partnerships with regional dictators such as Chavez, Morales, Correa, Ortega and the Castro brothers.”

(It bears noting as well that in the Nov. 22 Republican presidential candidates’ National Security Debate, the threat posed by radical Islam operating in the Western Hemisphere was featured prominently as a national security issue that official Washington was neglecting.)

Thankfully, it appears the steady drumbeat of concern about Iran and their Hezbollah proxies’ strategic push into the Americas has finally caught the White House’s attention.   To date, U.S. law enforcement agencies have had to confront this threat virtually alone.  It is time the entire Executive Branch foreign policy apparatus joins in, including the slumbering State Department.

Most importantly, it is time for ramping up actions to back up the president’s words.   This includes not only identifying more individuals, companies, and/or governments found to be aiding and abetting Iran and Hezbollah in their nefarious activities and bringing the full weight of sanctions against them, but also conducting a full-bore public diplomacy campaign for regional audiences on Iran’s intentions and activities in the region and the dangers for their societies therein.

To date, consorting with Iran has been a freebie for anti-American demagogues like Chávez, Ecuador’s Rafael Correa, and Bolivia’s Evo Morales.  The administration needs to move now to raise the costs.

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USA: Cobalt Excited About Return to Gulf Drilling

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Cobalt International Energy, Inc. announced today that the Ensco 8503 drilling rig, contracted to Cobalt, has returned to the U.S. Gulf of Mexico following a sublet of the rig to drill a well in French Guiana. Cobalt received the required U.S. Coast Guard Certificate of Compliance and has subsequently received APD approval from the Bureau of Safety and Environmental Enforcement (BSEE) for the Ligurian #2 exploratory well.

The company expects to spud Ligurian #2 by year end. Ligurian is located in the Southern Green Canyon Area immediately adjacent to the 2009 Heidelberg discovery in which Cobalt is a part owner. After drilling Ligurian #2, Cobalt plans to move the rig to the North Platte #1 well location in the Garden Banks Area to drill that prospect. Cobalt anticipates that each of the Ligurian #2 and North Platte #1 exploratory wells will take approximately six months to drill.

“Obtaining the approved APD for Ligurian #2 represents another significant milestone for Cobalt”, said Van P. Whitfield, Cobalt’s Chief Operating Officer. “Ligurian #2 will be our first company-operated well drilled in the Gulf of Mexico since the deepwater drilling moratorium was enforced in May 2010. We are definitely excited about our return to drilling and are confident in our ability to drill this well safely. Additionally, we look forward to obtaining the additional permits required to drill and evaluate the multiple other significant world class prospects we have in our Gulf of Mexico portfolio.”

Cobalt is the operator of the Ligurian #2 well located in Green Canyon Block 814, with a 45% working interest. Other working interest owners include TOTAL E&P USA, INC. with a 30% working interest and Sonangol Exploration & Production International, Ltd. with a 25% working interest.

2012 Cash Expenditure Forecast

Cobalt also announced that its 2012 cash expenditures will be $500-$550 million. This range is consistent with previous guidance for 2011-13 cash expenditures of $1.3-$1.4 billion and compares with $170-$190 million recently estimated for 2011. The increased cash expenditures for 2012 relative to 2011 anticipates increased U.S. Gulf of Mexico and offshore Angola drilling activity and the payment of the first social bonus contribution associated with Angola Block 20. Cobalt’s net expenditures for 2012 exploration and appraisal drilling are forecasted at $250-$300 million. Each range of cash expenditures excludes changes to restricted cash items such as escrow agreements and collateralized letters of credit.

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Australia: Clough Completes Sale of Marine Construction Business

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Engineering and construction company Clough Limited announced that it has completed the sale of its Marine Construction business to SapuraCrest Petroleum Berhad for gross proceeds of approximately AUD 127 million and on the terms previously reported in the company’s ASX Announcement of 8 August 2011.

Clough’s offshore Marine Construction Division includes the derrick lay barge, Java Constructor, and associated marine construction equipment. Also included will be Clough’s interest in the Clough Helix Joint Venture, which operates the chartered Normand Clough vessel, and its investments in specialist engineering businesses, OFI and Peritus. Relevant contracts including the Chevron Gorgon Domestic Gas pipeline project are proposed to be novated.

Post transaction the division will continue to operate from Perth with a continuing focus on both the Australian and regional markets. Clough will continue to provide a number of back office services to the business for a period of two years.

About Clough

Established in 1919, Clough delivers an integrated Engineering, Procurement and Construction service to oil and gas and mineral resources projects primarily in Australia and South East Asia. The Group’s services range from concept development through design, construction, installation, commissioning, operations and maintenance.

Backed by an experienced management team, over 3,600 personnel and sophisticated project management systems, we are recognised for our commitment to safety, sustainable development and the wellbeing of the people, communities and environments in which we operate.

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UK: Talisman Selects Helix Well Ops for Subsea Works on Its Assets

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Subsea well intervention specialist Helix Well Ops UK (Well Ops), has been awarded a multi-service contract by Talisman Energy (UK) Limited.

The contract will see the Aberdeen-based firm carry out a number of subsea workscopes that include well maintenance and production enhancement operations, and a number of well abandonments at various fields within Talisman’s portfolio of assets. The multi-service campaign is anticipated to last upwards of two months and will be undertaken from Well Ops’ mono-hull saturation diving and well intervention vessel MSV Seawell.

Launched in 1987, MSV Seawell was one of the pioneers of the light well intervention market in the North Sea and will soon be entering its 25th year of service across the UKCS, NCS and Danish sectors of the North Sea. During this period the vessel has performed well intervention work on more than 650 wells, as well as decommissioning over 150 live and suspended wells and 15 subsea fields.

The 114-metre (374ft) DP2 vessel features a purpose-built derrick for well intervention above a 7m x 5m moon-pool and a travelling block rated to 80-tonne lift capacity. MSV Seawell has a saturation diving capability of up to an 18-man team, and these services are supported by work-class and observation-class ROVs.

Steve Nairn, Well Ops’ regional vice president of Europe and Africa, said: “Well Ops has successfully carried out a number of well intervention projects for Talisman in recent years and we are very pleased to be continuing our long-standing relationship with the award of this two-month, multi-service project.”

The abandonment of wells is anticipated to make up a significant proportion of the estimated £30billion expenditure that will be spent decommissioning the UK’s oil and gas infrastructure. Industry body Oil & Gas UK has said that between 2012 and 2020, it is estimated that £1.6billion will be spent decommissioning wells.

Mr Nairn added: “Although well abandonment and decommissioning is being discussed more widely, there is still uncertainty as to the speed that such projects will come on stream. At the same time, due to the investments which are being made in the North Sea establishing new fields and rejuvenating existing ones, there will continue to be a demand for our broad range of well intervention, diving and light construction services.”

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Oceaneering Bags Angola Gig from BP

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Oceaneering International, Inc. announced that it has secured a three-year Field Support Vessel Services contract from BP p.l.c. Oceaneering will provide project management, engineering, and vessel services offshore Angola on Blocks 18 and 31, commencing February 1, 2012. The contract provides for two option periods of one year each, exercisable by BP.

Two chartered vessels, the Ocean Intervention III and the Bourbon Oceanteam 101, will be supplied under the contract. Each vessel will be outfitted with two Oceaneering work class remotely operated vehicles (ROVs) capable of working in 3,000 meters of water. Oceaneering will mobilize its chartered vessel, the Ocean Intervention III, from the U.S. Gulf of Mexico to Angola commencing in early January 2012. The contract scope of work includes light subsea construction, inspection, maintenance, and repair services on existing and future subsea infrastructure. The contract has a provision for Oceaneering to provide, at BP’s option, a third vessel after the commencement date.

M. Kevin McEvoy, President and Chief Executive Officer, stated, “We are pleased to have secured this contract with BP, one of our largest customers. This project builds on our well-established deepwater vessel project capabilities in the U.S. Gulf of Mexico and represents a significant geographic expansion with considerable backlog for our Subsea Projects business. It further reinforces our long-term commitment to Angola, which is a growing market for Oceaneering’s services and products.

BP’s involvement with Angola goes back to the mid 1970s. During the 1990s, BP made very substantial investments in Angola’s offshore oil, and it is now an important part of the company’s upstream portfolio. The UK based oil giant on Tuesday confirmed that it has gained access to five more deepwater exploration and production blocks offshore Angola.

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