Whilst most of the reviews so far concentrate on him being gay and his fall from grace, we also get glimpses of the power of oil and what it was like to be a 20th Century oil baron.

As Rowena Mason writes in the Telegraph: “In his lively jaunt through 40 years in the industry, including a decade in charge, Lord Browne exposes the political clout of a multi-national oil boss, hurtling between secret meetings with Russian oligarchs and the world’s most powerful leaders.”

Meetings with  Clinton, Blair, Gaddafi, Putin and Chavez are described in detail.  So is the time when he used ex-British Prime Minister, Margaret Thatcher, to help BP win contracts in Azerbaijan. After the deal was signed: “We stayed up until three in the morning drinking with Mrs Thatcher. What I like about her was that she had style and was never prissy.”

Once dubbed the Sun King by the Financial Times, in his last years at the helm it all started to go wrong. He conceeded that the FT article had “set me up as an arrogant target”, adding that “all that went wrong with the company would ever after be personalised”.

But the mistakes started to happen. “There is no doubt that I became obsessed with BP and its challenges. When determination and enthusiasm turn into obsession, you lose your balance.”

His arrogance and a culture of complacency contributed to BP’s failure to prevent a huge oil spill in Alaska and the explosion at the company’s Texas City oil refinery, resulting in 15 deaths and 170 injuries. “My blood ran cold,” he recalls when told of the explosion.

He expresses regret at what happened in Alaska. “I wish someone had challenged me and been brave enough to say: ‘We need to ask more disagreeable questions.’”

He also reveals what many people have often wondered: that BP and Shell considered merging at one point. He met his then opposite number at Shell, Jeroen van der Veer, at Lake Como in Italy in 2004.

“Keen observers might have spotted two figures strolling beside Lake Como one morning after coffee. Shell’s CEO and I both agreed we should deeply consider the possibility of a merger,” writes Browne.

But the plan was blocked by his own board.

Although Browne was often pillored on this blog, we should remember this is an oilman who shunned the tar sands, pulled BP out of the Global Climate Coalition and rebranded it “beyond petroleum.” The book talks about how he repeatedly tried to get repressive regimes to be more transparent about their oil revenues.

Browne’s tenureship at BP resulted in serious failings. But whereas Browne may have been the Sun King who tried to tinge an oil giant green, his successor Tony Hayward is rapidly turning into the tar sands king who will turn it dirty brown.

And now the investors are targeting BP asking it not to invest a massive $10 billion in its Sunrise tar sands development.

A group of British investors, co-ordinated by FairPensions, question whether the tar sands projects will be profitable due to rising carbon dioxide levels. They are also raising concerns about “legal and reputational risks arising from environmental damage and indigenous community impacts”.

The reputational risks hardly need spelling out: BP that once branded itself Beyond Petroleum, is now threatening to spend billions on the dirtiest petroleum of them all.

For years BP prided itself of not being involved in the tar sands development.  Niall O’Shea, head of responsible investing at the Co-operative Asset Management said: “BP, which previously made a virtue of its lack of exposure to oil sands, is now gearing up to exploit them.”

O’ Shea added: “We believe that environmental costs may make an expensive business prohibitively so - without fundamentally addressing the issue of a large net rise in emissions. BP should reassure shareholders that what they’re embarking on is fully costed, prudent and can withstand a more carbon-constrained world.”

However there is now an interesting difference between BP and Shell over the tar sands. Whereas Shell’s relatively new chief executive, Peter Voser, has indicated that the company will slow its plans for growth in Alberta, Tony Hayward, his opposite number at BP, last week suggested that the company is gearing up to press ahead with tar sands development big time.

Also in contrast, Hayward’s predecessor Lord Browne was an outspoken critic of the tar sands. He sold off BP’s interests in Alberta in 1999.

Just over a decade later, BP says it will make a final decision on Sunrise later this year.

Although the company it already trying to greenwash its proposed operations:

“This development is needed to meet the world’s growing demand for energy and we believe BP can do it in an environmentally sustainable way,” Toby Odone, a spokesperson for BP said today.

“Environmentally sustainable” and the “tar sands” are a contradiction in terms. Will be interesting to see how BP spins this one..

WTI Meltdown on Friday Feb. 05 2010

Two stories from Canada’s Globe and Mail this week highlight the emerging reality that the oil industry in North America is downsizing; although the commentary mostly misses the underlying trend that is staring it in the face.

Firstly, the G&M highlighted an analyst note from Toronto-Dominion Bank, which warned of a glut in oil supplies due to falling demand in OECD countries and a surge in supply, as new projects come on stream while many OPEC suppliers are failing to stick to quotas. The effect according to TD will be to hold down prices. Not good news for expensive tar sands oil.

But the uncertain future for tar sands was brought more sharply into focus when it emerged that Suncor and Imperial Oil (60% owned by Exxon) are appealing to a US regulator to force Enbridge to hold back on increasing pipeline tolls from Canada because they say Enbridge is building too much pipeline capacity for tar sands oil into the US.

Suncor and Imperial are referring to Enbridge’s Alberta Clipper Pipeline which could potentially pump 450,000 barrels a day of dirty tar sands crude 1000 miles from Hardisty Alta. to Superior Wis. The pipeline is nearly complete and is expected to start operating in April.

The problem as the oil producers see it, is that since they signed up for Clipper back in 2007, the outlook for tar sands has deteriorated sharply and they are unsure how much tar sands crude they will have available to pump through Enbridge’s new line. The contract between Enbridge and oil producers guarantees Enbridge revenue making it more expensive for oil producers to use only a portion of their allotted capacity.

Suncor’s filing to the US regulator stated that, “Shippers are not required to pay for a pipeline that did not need to be placed into service”.

I have little sympathy for either side but the situation highlights the cracks that are appearing in an industry that for so long has bubbled over with brash self-confidence and bulldozed mostly everything in its path.

The fact is US oil demand peaked in 2007 and demand in OECD countries as a whole did likewise around 2005. While the 2008 global oil demand nosedive is significantly related to the recession, most analysts agree that economic recovery will see only a moderate oil demand recovery in the US and OECD and that the graph lines for oil demand in these developed economies are heading south in the long-term. The extreme inefficiency with which the US in particular has been consuming oil is changing and this is a good thing for the US economy, the climate, and for US security.

Debate about how much China and other non-OECD countries will pick up the slack rages on and no doubt they will pick up some of it. But for tar sands producers and many of the international oil companies that are heavily weighted towards the North American market, what’s happening in the US needs to be taken seriously. The spat between Enbridge and Suncor and Imperial is just the beginning.

TransCanada’s Keystone XL pipeline proposal, which is slated to bring 500,000 b/d of tar sands crude to the Gulf Coast by 2013, will result in around 41% excess capacity in Canada-US pipeline systems, according to the G&M article. That means that on top of paying some of the most expensive capital costs in the oil industry to pull tar sands crude out of the ground, producers will be paying a premium to get it to refineries, while refineries will be paying the extra costs of processing the heavy sour crude into products that are decreasingly in demand. Sounds like the party’s over to me.

The US regulator should not be wasting its time adjudicating oil industry spats. What it should be doing is supporting the transition to the post-oil era by speeding up the development of a smart grid that will save billions in wasted energy and facilitate renewable energy sources and electric transportation. The government should fast track new planning regulations that allow and encourage mixed use development that reduces car use, enables greater take up of public transportation and results in a healthier, cleaner and more productive lifestyle for millions of people.

In short the US government needs to grab the opportunity to speed up the predicted decline in oil demand and thereby nullify the debate about tar sands oil. As the most costly, infrastructure heavy and dirty source of oil currently in production, tar sands crude will simply not be worth it once we get demand down to more sane levels.

Then I suggest we let big oil and its associated infrastructure companies sort themselves out in a Darwinian race to extinction. After all they’ve had it pretty good for a century or so, it’s time to move over.

Last August in the blog “What About the Demand-Side Warning?” we quoted Lorne Stockman, the author of report on how reducing oil demand might affect the tar sands.

Stockman said that the time “A peak in oil demand was barely discussed even a year ago, but now it is a viable idea. When it happens, I wouldn’t want to guess, but it will happen sooner than we thought. There has been lots of talk about a supply peak, but it is good to start talking about a demand peak, and that has huge implications for these companies.”

Many have been dismissing peak demand as something that would happen decades away, but now we have it from the horse’s mouth that its sooner than we think.

The CEO of BP, Tony Hayward, has said that global peak oil demand is set to peak between 2020 and 2030. And that will be before supply peaks.

He has changed his tune. Just last summer, Hayward was one of those saying that demand for oil would peak decades into the future.

But not anymore. He now argues that government policies in the developed world are eroding demand at the rate of 1 percent per year.  Such is the falling demand that there was an oversupply of refineries, which is prompting oil companies to close and sell facilities.

According to Hayward, world oil demand will peak sometime after 2020 at a maximum of around 110 million barrels per day. “World demand will peak before its supply peaks because there is plenty of oil in the world, there really is. There are some challenges getting it out in some places, mainly to do with geopolitics, but there is plenty of oil in the world.”

Hayward now believes the oil industry will never sell more gasoline in the United States or Europe than it had done during the boom in 2007.

Hayward’s revised prediction comes months after Deutsche Bank forecast it would peak in six years’ time.

Who is going to be proved right and what does it mean for the costly tar sands?

But cast your minds back even further to the Falklands conflict in the eighties. You could ask the question was Margaret Thatcher’s defining conflict about securing British sovereignty for the Islanders or was this ever about the Falklands’ rich resources?

Whilst the evidence points overwhelmingly in favour of the former, the second part of the equation cannot be ignored.

Even though the conflict was nearly thirty years ago, the diplomatic tension is rising again over oil exploration.

Over the last few years, exploration has gathered a pace and drilling is now due to start in February when a rig arrives.

As the Financial Times reports: “Excitement has been mounting for more than a decade that the waters around the disputed islands could contain significant quantities of hydrocarbons, and the forthcoming drilling campaign is seen as the moment of truth.”

Whether everything goes boom or bust, remains to be seen, but Argentina is certainly not happy about what is going on. Yesterday it summoned the British Ambassador in Buenos Aires to issue a “vehement protest” about the imminent start of the drilling.

The diplomatic language used was harsh.  “What they’re doing is illegitimate .. it’s a violation of our sovereignty. We will do everything necessary to defend and preserve our rights,” said Argentinian Foreign Minister Jorge Taiana.

In signs of trouble ahead, the Argentine government said it will never give up its claim to the Falklands, which it calls the Malvinas.

A British embassy spokesman said: “The Falkland islands government is entitled to develop a hydrocarbons industry within its waters and it is longstanding UK government policy to support this.”

However, it is precisely these waters that Argentina calls its own.

If large scale oil deposits are found, and many people believe that there are large deposits there – the conflict can only escalate.

Part of Shell’s “new Energy Future” is the Canadian tar sands, where it has been investing heavily (although it may be shifting direction again back to more conventional oil and gas reserves).

The company has always defended the environmental impact of tar sands and its record in Canada.

However underneath the Shell banner advert is an article called “Taking gentle aim at oil sands” which reports comments made by Canada’s Federal Environment Minister, Jim Prentice who said yesterday that the oil companies had to improve their environmental performance.

Prentice argued that Canada risks becoming “cast as a global poster child for environmentally unsound resource development” if it doesn’t clean up its act on the tar sands.

“The development of the oil sands and the environmental footprint of these industrial activities have become an international issue and as such, they now transcend the interests of any single corporation,” Prentice said. “What is at issue on the international stage is our reputation as a country.

Despite the rhetoric, Mr. Prentice did not outline specific regulations that would force companies like Shell to reduce greenhouse gases emissions, until the US acts.

“We have to calibrate at the end of the day the obligations we impose on trade-exposed industries with those that are to be imposed in the United States, otherwise we will have discordant energy and environment policies and so some choices have to be made south of the border,” Prentice said.

Prentice said Canada hopes to harmonize its emission reduction targets with United States and Mexico.

But seeing that nothing is likely to happen politically on climate in the US for a while (at least this year), this could be a recipe for inaction on Canada’s behalf.

On Saturday the company had to shut three oil flow stations in the Delta region after a pipeline was sabotaged by armed gun-men.

It was the same day as Nigeria’s militant group Mend said it was ending the truce it declared last October, declaring an all out war on the oil companies and the government.

In a statement Mend told the oil companies to leave the Delta immediately, although it denied being directly involved in the latest attack.

In an e-mailed statement MEND said: “It was certainly a response to our order to resume hostilities by one of the various freelance groups we endorse.”

It could have been a perfect co-incidence, but the day before the sabotage incident there was a really interesting development when Shell did exactly what Mend wants.

It offloaded some of its assets. Press reports say that Shell’s subsidiary in Nigeria, the Shell Petroleum Development Company of Nigeria Limited (SPDC), agreed to transfer its interest in three production licences to a consortium led by two Nigerian companies.

The buyer is Seplat Petroleum Company Limited, a company jointly held by two Nigerian firms, Platform Petroleum Limited and Shebah Petroleum Development Company Ltd, along with Maurel & Prom of France.

The chief executive officer of Platform Petroleum, Austin Avuru has called the deal a “landmark transaction for a Nigerian company.”

According to the oil giant, the licenses cover Shell’s 30 percent interest in 3 oil leases covering approximately 2,650 square kilometres in the north western Delta. The area includes about 30 wells with a production capacity of approximately 50,000 barrels of oil equivalent per day.

So this could be the start of Shell’s slow off-loading of $5 billion of its onshore and shallow water assets as it seeks to extract itself from 50 years of violence and conflict.

And the local Nigerian companies think they can naturally get on better with the people of the Niger Delta than Shell.

“We know that security is the major risk that we’ll face, it’s also a risk we think we can manage better than the multinationals. So it’s part of the reason we were considered to come in,” Mr Avuru said.

Whether they do a better job than Shell remains to be seen.

It can’t be that difficult.

Since the middle of last year I have been writing about the vulnerability of the tar sands industry to a slow down in the growth rate of oil demand. With some of the most expensive cost structures in the oil industry, the future growth of tar sands production requires oil prices to stay high over the long term.

But high oil prices exert a deflating effect on the economy and in turn reduce demand and prices.Compounding this effect is the fact that high oil prices have made large economies that are increasingly dependent on oil imports, such as the USA and China, painfully aware of their economies’ vulnerability to the rising cost of oil.

As a result policies to decrease oil use are gathering strength and this is being further reinforced by climate change policy.

Forecasts for oil demand in the 2020-2030s have been progressively reduced by agencies such as OPEC and the IEA over the last four years based on the emerging realisation that governments can and will implement demand reduction polices to protect their economies and address climate change.

These policies will mostly take advantage of the huge scope for efficiency in the private transport fleet meaning more efficient traditional engines as well as increasing diversification into electrification.

The net result is that the highest cost barrels in the market (read tar sands) may not reap the profits in the long term that oil companies have been hoping for.

So when a company like Shell, the biggest international oil company in the tar sands that has stated on several occasions that its ambition is “to be the leading oil sands operator” starts to show signs of an about turn, the rest of the industry should be worried.

Shell spent most of the last decade aggressively ramping up its position in the tar sands. In 1999 it started constructing the Athabasca Oil Sands Project, at the time it was the first major new tar sands project for 25 years.

It went on to acquire some of the biggest leases in the industry and had plans to increase production from 155,000 barrels a day (b/d) today to 770,000 b/d in the 2020s at its mining operation alone.

The company also had plans to develop more energy intensive in situ production to over 100,000 b/d and had made a land purchase in 2006 described by the Wall Street Journal as “eye popping” of bitumen carbonate deposits in Alberta, an as yet un-commercial resource that may require huge amounts of electricity (think nuclear) to bring into production.

In fact together with its endeavours to develop oil shale in the USA, China and Jordan, Shell was clearly positioning itself as the world’s prime developer of energy intensive unconventional oil.

So has that changed? Shell today has 155,000 b/d of capacity at its tar sands mine and is nearly finished a $14 billion expansion that will add another 100,000 b/d. It also has about 35,000 b/d of in situ capacity at two other sites in Alberta.

But Voser’s claim to the FT that it will not seek further expansions at least for the foreseeable future is a significant change of tone compared to the extreme confidence with which any mention of unconventional oil was discussed up to just a few months ago.

Even after the recession put the next phase of expansions at the AOSP project and Shell’s Carmon Creek in situ project on hold, Shell continued to discuss unconventional oil as an inevitable part of the future.

If Shell now feels that unconventional oil may be too risky and, as stated in the FT, plans to refocus on conventional oil and gas, what does that mean for Alberta, Canada, the tar sands industry and US energy security?

It could mean that those of us that have been saying for some time now that real energy security will come from reducing oil demand through efficiency and technology diversity rather than pretending that we can keep paying for more expensive and more environmentally destructive oil are right.

The industry and those in Alberta and Canada that depend on it may have to accept that the dreams of reaching 5 million b/d were never realistic and have led to a dangerous over reliance on tar sands for the companies involved and the Albertan and Canadian economies.

Time will tell but the storm clouds on the tar sands horizon appear to be gathering.

Instead the President will focus on the economy and helping recession-hit families.

Although the White House has denied Obama is scaling back his plans, this is exactly what they are doing.

There is no doubt that climate change has slipped down the list of the President’s priorities since Scott Brown’s election last week and the fiasco of Copenhagen.

And in essence Obama may just be reflecting the way that climate change has tumbled down the list of voter’s priorities in the US too.

The Economy, jobs and terrorism all scored highly in the Pew Centre’s latest survey of voter’s priorities for 2010, with 80 per cent or more rating it as a “top priority”.

In contrast only 28 per cent put global warming as a top priority, the bottom of the list.

This is bad news for anyone pushing climate as an issue.

This means that the chance of Cap and Trade legislation being passed this year look extremely slim.

“Realistically, the cap-and-trade bills in the House and the Senate are going nowhere,” Senator Lindsey Graham, Republican of South Carolina, who is trying to orchestrate a bipartisan package of climate and energy measures told the New York Times. “They’re not business-friendly enough, and they don’t lead to meaningful energy independence.”

It is not surprising that many in the energy industry are ecstatic.  “Reality is hitting, and the reality is the American people are interested in jobs, not extreme legislation,” said Larry Nichols, chief executive of Devon Energy and chairman of the American Petroleum Institute. “Because of the shift in raw political power, there now has to be compromise.”

And we all know that a “compromise” in Washington is in real terms a victory for the industry lobbyists.

So it remains to be seen what Obama will say today, but don’t hold out any high hopes.

According to the Guardian, some Obama aides are “advising the president to downplay or even avoid mention of the words ‘climate change’,” in his speech.

What a difference a year makes..

The figure has tripled since 2004.

Because the US is by far the largest grain exporter, the fact that it is feeding an increasing amount of grain to its vehicles rather than people, will have a damaging effect on world food supplies.

The Institute points out that the 107 million tons of grain that went to U.S. ethanol distilleries in 2009 was enough to feed 330 million people for one year at average world consumption levels.

And because the US subsidises its ethanol production by a massive $6 billion, this means it is effectively subsidizing rising food costs for the rest of the world.

And given that a record number of people – 1 billion – went hungry last year, the situation is somewhat perverse as the rich feed food to the cars and the poor go hungry.

The figures sound even more perverse when you bring that number down to a human scale: The amount of grain needed to fill the tank of an SUV with ethanol just once can feed one person for an entire year.

The situation is also set to get worse as the Renewable Fuel Standard mandates that more food be converted to fuel.

“There is a direct link between biofuels and food prices. The needs of the hungry must come before the needs of cars,” argues Meredith Alexander, biofuels campaigner at ActionAid in London.