I spent some six months in the country over twenty years ago and even then the American oil company Amoco was busy exploring for oil in the North of the country and in the Gulf of Aden.

The reasoning being simple – the logic went back then that the huge oil fields found in Saudi Arabia and the Gulf curve like a spoon under the Yemen and Red Sea and pop up in Somalia and the Gulf of Aden.

Amoco’s excitement was also due to large natural bitumen seepage in the North of the country. But, to my knowledge, nothing ever came of it.

Since then, Somalia has descended into chaos and anarchy and become the country largely forgotten by the outside world.

Or has it? Last week, the last ambassador of the United States to Somalia (1994-1995), Daniel H. Simpson, who is now an associate editor for the Pittsburgh Post-Gazette wrote a piece called “Folly in Somalia”.

He posed the question “why, apart from the only lightly documented charge of Islamic extremism among the Shabab, is the United States reengaging in Somalia at this time?”

The week before that the New York Times had reported that the US was offering increased military support to a new Somali government offensive.

The primary reason for US engagement is of course the worry that Somalia, as a failed state, is becoming a haven for terrorists, and, as the paper put it:

“The United States is increasingly concerned about the link between Somalia and Yemen, a growing extremist hot spot, with fighters going back and forth across the Red Sea in what one Somali watcher described as an “Al Qaeda exchange program”.”

Chasing Al Qaeda round the Horn of Africa may be the US’s primary objective, but a great article on Information Clearing House, also points to other reasons and that of course means oil.

The same day as Daniel Simpson penned his piece in the Pittsburgh Post-Gazette , a UPI press article wrote a feature titled “East Africa is next hot oil zone.” The news agency disclosed that:

“East Africa is emerging as the next oil boom following a big strike in Uganda’s Lake Albert Basin. Other oil and natural gas reserves have been found in Tanzania and Mozambique and exploration is under way in Ethiopia and even war-torn Somalia.”

The region, until recently largely ignored by the energy industry, is “the last real high-potential area in the world that hasn’t been fully explored,” Richard Schmitt, CEO of Dubai’s Black Marlin Energy, which is prospecting in East Africa, told UPi.

About Somali it said: “A 1993 study by Petroconsultants of Geneva concluded that Somalia has two of the most potentially interesting hydrocarbon-yielding basins in the entire region — one in the central Mudugh region, the other in the Gulf of Aden.”
Hence Amoco’s interest in the late eighties.

And hence, in part, America’s interest now….

Meanwhile two days ago, the oil company Range announced it is finalising the work on the first exploration well to be drilled in Somalia’s semi-autonomous Puntland region for over 16 years, after concluding negotiations with the Government of the Puntland State.

The boys are back in town …

The revenues are important as they under-pin the 2005 peace agreement, which brought to an end one of Africa’s longest-running and most bloody wars.

In the peace deal both sides agreed to share oil revenues.

However the suspicion held by many southerners is that the North is underreporting the volume of oil produced in order to transfer less money to the southern government than is due under the peace agreement.

In response to the allegations, the authorities promised they would address the inconsistencies by conducting an audit.

Six months on, that audit has yet to take place. Global Witness has revisited the subject and found that there are still major discrepancies in the oil productions figures. With the Chinese National Petroleum Company producing figures 12 percent higher than those published by the Sudanese government.

Rosie Sharpe, from Global Witness, argues the difference of 12 million barrels of oil is worth $370 million and is enough to power a city in the US the size of San Francisco for a year.

Global Witness argues that the correct records are fundamental for the stability in Sudan.  “The oil money has been the glue that has held the two sides together for the past five years, that is why it is important that we get it right, it is the figures that underlie that power sharing,” said Sharpe.

Sharpe says this makes it important that oil revenues are reported correctly. “The authorities in the north are responsible for stating how much oil was produced. The south has no way of checking whether these figures are correct and therefore whether the revenues the southern government receive are correct. This is a critical issue and one which could be decisive in determining whether the upcoming referendum on independence passes off peacefully.”

Finally she adds: “Transparency - of which a first step is conducting an audit - will be needed for both sides to trust the current revenue sharing agreement, and any future one.”

Once again Nigeria was mentioned as a key country where the company had added strategic reserves.

“These are exciting times for Shell”, said Voser. “We are poised to deliver a new wave of financial and production growth.”

Quite how much of this growth will come from Nigeria remains to be seen. For the last fifty years, Shell’s and Nigeria’s futures have been intertwined.

However as the violence spreads in the Delta and elsewhere in Nigeria and the country limps along in a political vacuum, influential voices are warning that the country is on the brink of collapse.

Thousands of miles away from Voser’s polished presentation, Wole Soyinka, the Nigerian Nobel peace prize novelist warned that Nigeria is close to breaking up and had become a failed state.  He said the leadership of the country has descended into a “theatre of the absurd”.

Soyinka’s warnings came soon after ther Movement for the Emancipation of the Niger Delta (Mend) – the leading militant group in the delta region – set off two car bombs, in the government building in the southern oil city of Warri, where talks were being held about implementing an amnesty programme.

Mend said the explosions were meant to “announce our continued presence”. The group warned that it plans renewed attacks against the oil industry in coming days. Officials from the Delta states had been meeting in Warri to discuss implementing the terms of an amnesty programme launched last year.

Soyinka defended the “real militants”, whom he said had a right to take on the government over decades of neglect, rights abuses, environmental crimes and theft of resources.

Mr Soyinka said Nigeria had a failing “neocolonial constitution”: one that has historically supported the oil industry and not the people.

But don’t expert Peter Voser to admit that in his presentation today.

In their new report, the Co-op and WWF say the combined cost of all tar sands – $379 billion between now and 2025 – could be used for clean power projects such as the Desertec scheme linking solar plants in North Africa to a “supergrid” which could produce 15% of Europe’s electricity by 2050.

The money could also help half of the Millennium Development Goals in the 50 least developed countries, including averting four million child deaths annually and providing universal primary education.

These targets include averting the deaths of 4 million children, 300,000 mothers, and almost half a million victims of HIV and TB.

The report highlights Shell and BP’s involvement in tar sands investments. BP is set to invest $10 billion in its Sunrise tar sands project and also plans to spend another $2.5 billion converting a refinery in Toledo, Ohio, to process the synthetic crude oil produced from the tar sands. Meanwhile Shell is spending $14 billion to expand the Athabasca Oil Sands Project  to raise its capacity to 255,000 barrels per day.

“The sums of money being invested in tar sands developments are enormous and difficult for the average person to grasp,” says Paul Monaghan, head of social goals at the Co-op.

He added that the report, called The Opportunity of the Tar Sands, “puts things into perspective and demonstrates not only the scale of the problem, which could take us to the brink of runaway climate change, but also the opportunity being lost. It is literally a matter of life and death that these enormous oil titans are re-steered to much more sustainable paths.”

The report is being released to coincide with the UK premiere of Dirty Oil, a hard-hitting documentary film that outlines the impact tar sands extraction is having on the environment and the health of first nation Indians. It is being distributed in 25 cinemas across the UK.

Narrated by Canadian actress and environmentalist Neve Campbell, the beautifully photographed documentary from the Academy Award Nominated director Leslie Iwerks tells the tar sands story through the eyes of scientists, industry officials, politicians, doctors, environmentalists and indigenous Cree Indians.

To see the trailer for Dirty Oil click here.

In a broad-ranging deal, BP will pay Devon Energy $7 billion for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico.

Interestingly the deal also involves extraction of the oil sands. BP will sell a 50 per cent stake to Devon Energy in BP’s Kirby oil sands interests in Alberta, Canada, for $500 million.

The parties have agreed to form a 50/50 joint venture, operated by Devon, to pursue the development of the tar sands venture.

But the main part of the deal is in Brazil. Andy Inglis, BP’s chief executive of Exploration and Production, said: “Through our entry into Brazil, BP will add a major position in another attractive deepwater basin. Together with the additional new access in the Gulf of Mexico, it further underlines our global position as the leading deepwater international oil company.”

However, has BP bet on the wrong horse?

To be the leading international deepwater company, you need to be in the right geological basins.

The deal will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight licence blocks in the Campos and Camamu-Almada basins. The Campos basin blocks include three discoveries - Xerelete, pre-salt Wahoo and Itaipu - and the producing Polvo field.

As the Daily Telegraph points out Devon’s assets are not in the strategic Santos basin where most of the recent excitement has been focused after multi-billion barrel discoveries in recent years.

So far this morning BP’s shares have slipped 5.3p to 619.6p, knocking nearly 4 points off the FTSE 100.

This could be a reaction to BP buying into the wrong basin….

He admits that Shell is fast becoming a gas company rather than an oil company. “Shell started quite a while back, actually, to put a lot of emphasis on gas” says Voser. “And by 2012, we will have more gas production world-wide than we have oil.”

Peter is positively enthusiastic about gas, which he calls “a long-term source of energy that has a lot of positives.”

One of these positives for Peter is that he argues that gas has “50%, 70% less CO2 than coal, for example, and that’s exactly where we see the long-term benefit.”

The trouble with figures is that they can be meaningless.

Voser is right when he says that gas contains about 50 per cent less GHG when you burn it than coal. But let’s look at the emissions generated from production of the fuel. For oil, extraction and refining emissions are about 20% of the overall life-cycle emissons.

Independent figures on the amount of carbon per barrel of oil equivalent produced in production have gas producing only small amounts less carbon than oil.

According to HSBC, conventional gas produces 22 kg per boe, whereas conventional oil is 25 kg boe.

I know that there really is not a standard “conventional” oil or gas as there is a huge range of estimates for carbon intensity depending on geographical location, and difficulty getting it to market.

But much of Shell’s future gas supplies will be reliant on turning gas to liquid to get to market, as I pointed out yesterday about their new billion dollar bid into the Queensland coal bed methane market.

What we do know is that  the carbon intensity of liquefied natural gas (LNG) is about three times worse than conventional oil, and on the par with the tar sands (75 kg/ boe).

So here is the rub- if Shell is going around and saying that gas is a clean bridging fuel, that it’s much cleaner than oil, depending on where this gas is coming from and how it gets shipped to market, gas may not be as clean as you think.

Compared to oil, this may be so – if and it is a big if, the gas is normal conventional gas. However, as traditional gas reserves are becoming harder to find and access, often they are far from the areas of demand.

So the way that the industry gets around this is to liquefy it and then ship it in tankers across oceans to where it is needed.  The only problem with this is that compared to conventional gas, just the process of liquefying it takes a huge amount of energy.

A report by HSBC, in 2008 called Oil and Carbon concluded that getting the gas to market in liquefied form “triples its carbon intensity relative to conventional gas.”

According to HSBC the kg of carbon per barrel of oil equivalent for traditional gas is 22 kg / boe and for LNG is 75 kg/boe – which is on the par with kg/boe of tar sands.

The other way oil and gas companies are looking for gas is looking for “unconventional” reserves of gas such as tight gas, shale gas and coal bed methane, sometimes known as coal-seam gas.

This is largely methane gas which is trapped in the structure of coal seams. In contrast, conventional natural gas is stored in the gaps between rock formations.

In the past decade, coal-seam gas has become an important source of energy in the United States and it became a major play in Australia.

From a climate perspective coal-bed methane (50 kg/boe) is over twice as carbon intensive as normal gas (22 kg/boe).

So what happens if you are extracting coal-bed methane and then liquefying it? You end up with a highly energy intensive energy form.

And this is what oil giant Shell is planning to do in Australia. Shell and PetroChina have underlined their desire to be significant players in Australia’s coal-bed methane gas sector by making US$3.4billion offer for Australia’s Arrow Energy. The deal does not include Arrow’s international assets, though.

Arrow is one of the leading companies in the state of Queensland that are investing billions of dollars in a race to convert reserves of coal-bed methane into liquefied natural gas.

Shell has been eying up Arrow for the best part of two years and last year made an unsuccessful bid for the company.

PetroChina’s interest is clear – it wants to secure long -term gas supplies from Australia’s coal-bed methane industry.

Arrow has responded that the offer is “nonbinding” and “conditional,” and recommended that its shareholders wait before taking action.

The media do not understand just how energy intensive liquefying gas from coal bed methane deposits is. The Telegraph argues the fuel “burns more cleanly than both coal and oil.”

But how can a gas that takes more energy to get to market than even oil from tar sands, be described as “clean”?

Those rooting for Avatar include a collation of 50 Indigenous and environmental groups who yesterday ran a great advert in the celebrity magazine Variety.

Called ‘Canada’s Avatar Sands,’ the ad draws the parallels between the film and what is happening in Alberta.

The Navi people stand in for the aboriginal communities living near the Athabaska Oil Sands in Alberta, and the Sky people represent the oil companies with mining operations there.

“Where Indigenous Peoples in Canada are endangered by toxic pollution and future oil spills,” reads the $20,000 advertisement.

“Where Shell, BP, Exxon, and other Sky People are destroying a huge ancient forest. Where giant Hell trucks are used to mine the most polluting, expensive unobtanium oil to feed America’s addiction.”

Michael Marx, head of U.S-based Corporate Ethics International, one of the groups that bought the ad argues: “There are people living the Avatar storyline around the world, and we’re grateful for the opportunity to bring attention to that.”

He added: “The tar sands of Canada and the infrastructure that is being built to import that oil into the United States is slowing down our transition to a clean-energy economy. It’s keeping us addicted to oil.”

Canadian Director James Cameron has also been outspoken about the movie’s message. “Avatar asks us all to be warriors for the Earth,” he said recently. “This beautiful, fragile, miracle of a planet that we have right here is our land. Not ours to own, but ours to defend and protect.”

The ad has got the oil industry fuming and its trying to greenwash its operations, just as the Royal Bank of Canada did yesterday.

The Canadian Association of Petroleum Producers  wants you to think of the oil sands as “responsible oil.”

“Canadian oil is responsible oil,” said Janet Annesley, Vice President of Communications for the Canadian Association of Petroleum Producers. “Unfortunately this blurring of the lines between fact and fiction by anti-oil activists has become all too common.

“We invite these activists back to planet Earth to discuss the appropriate balance between environmental protection, economic growth and a safe and reliable supply of energy.”

I bet Janet will be hoping that The Hurt Locker wins this weekend …

But they are not the only ones. There are also home-grown banks investing in the destruction of their own country.

Yesterday, over 170 people rallied outside of the Royal Bank of Canada’s (RBC’s) Annual General Shareholder meeting in Toronto.

The crowd, made up school children, bank customers and protesters, shouted slogans such as “Cultural Genocide: who do we thank? Dirty investments from Royal Bank!”

Inside, First Nations Chiefs and community representatives from four different Nations demanded that the bank phase out its investment of the tar sands.

“Shareholders are contributing to the ecological disaster of Canada’s natural resources,” said Vice Chief Terry Teegee of the Carrier Sekani Tribal Council of British Columbia.

Ryan Derange, known as Gitz Crazyboy, of the Athabasca First Nations, called the environmental impact from the tar sands an “environmental holocaust.”

He then invited RBC’s CEO Gord Nixon to visit his community to witness the devastation.  Nixon tried to defend the bank’s lending policies, arguing that only 2 per cent of the C$300 billion globally are loans to the oil and gas sector. Of this only a “small share” is lent to companies operating in the oil sands.

“We’re a bank, not an oil company, not a government, and we’re not even a leading lender to oil companies,” Nixon said. “We’re not siding with the oil companies, and we believe development has to be done in a responsible way.”

However according to Bloomberg, since 2007, RBC has backed $16.9 billion in loans to companies operating in the tar sands, and has earned more than $132 million in underwriting fees – more than any other bank.

Brant Olson of the Rainforest Action Network, one of the organisers of the protest said: “RBC has a decision to make. They can continue to align themselves with the tar sands, a project that is single-handedly compromising the climate, drinking water and the health of First Nations. Or they can lead Canada’s economy toward clean energy and socially responsible development.”

Afterward, Indigenous leaders led the crowd in a march to rally outside the bank’s headquarters.

How Nixon can call what is happening in Alberta “responsible” is beyond me.

He needs to visit the tar sands for himself.

In a frank admission, Hayward said that BP’s financial importance over the last few years had not been acceptable and had “some catching up to do.”

Hayward said that last year the company made savings of $4bn, over half of which was down to efficiencies. He promised that savings would increase this year.

But behind the headlines it is worth looking at where BP sees the oil industry going in the next decade and where it will be looking for its oil and gas in the future.

Despite having once branded itself Beyond Petroleum, BP believes that fossil fuels will remain the dominate source of energy until at least 2030 when the company anticipates that the world will consume around 45% more energy than today.

Most of this energy will come from oil and gas.

In the short-term – up until 2015 -   the company’s main forty or so new projects will all be in traditional mature regions such as the North Sea, Azerbaijan, Angola and the Gulf of Mexico. These projects would increase production by about 1 million barrels / day.

But let’s not forget the prize of Iraq. BP has a long history with Rumaila dating back to its discovery in 1953, noted Andy Inglis, the company’s head of Exploration & Production.

BP is hoping that Rumaila will become the world’s second-largest producing field by 2015 if it can more than double production to exceed 2m barrels a day.

But this is only the first of many projects in Iraq, hopes BP. The oil giant admitted it saw this “as the beginning of a long-term relationship with Iraq”.  The company is “continuing to look for further opportunities”.

So once you have your hands on the prize you are unlikely to let go, although what happens at this weekend’s election may have a material effect on BP’s Iraq strategy.

Beyond 2015 BP’s upstream growth is focused on deepwater production, global gas production, and managing giant oil fields. The company argues that “significant yet-to-find resources remain in the world’s deepwater basins.”

It predicts that gas use will increase. “Currently we produce approximately 8.5 billion cubic feet per day and expect continued steady growth throughout the decade, with our gas weighting increasing from 40 to 45%.”

Beyond these areas it is interesting as to where BP thinks the oil will come from.

Andy Inglis gives us a clue by saying: “BP’s strength lies in operating at the frontiers of geography and technology, and executing projects at a scale only a few companies can take on … there are many other things I could talk about, such as the Arctic, but they are for 2020 and beyond.”

So BP maybe getting back to basics and investing in oil and gas. But a company that once prided itself on being green sees long-term growth in the Arctic.

BP estimated last year that the Arctic Ocean may hold about 200 billion barrels of oil equivalent resources, or between a quarter and a half of the world’s undiscovered hydrocarbons.

And that can only be a bad thing for this ecologically fragile region.