Fun with China: Sanctions Against the China National Offshore Oil Corporation

Sometimes, strategy includes economic "warfare," as China well knows from its actions againts those countries that dare to criticize it - like Australia. However, China itself is subject to such strategies, which the Trump administration has been using with some effect. What follows is a look at one such move.

World Oil Report links a Bloomberg report U.S. sanctions China’s CNOOC on drilling in disputed South China Sea:

China’s third-biggest oil company faces a U.S. blacklist, which could spur major outflows from its Hong Kong-listed unit, after years of involvement in offshore drilling in disputed South China Sea waters.

China National Offshore Oil Corp., the nation’s main deepwater explorer, is among four companies to be added to a list of firms owned or controlled by the Chinese military, Reuters reported. The move comes as the Trump administration plans several new hard-line moves against Beijing in the final weeks of its term.

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CNOOC is the smallest of China’s so-called big three state-owned oil majors after China National Petroleum Corp. and China Petrochemical Corp., also known as Sinopec. CNOOC’s operations in the South China Sea have run into controversy because China claims drilling rights in waters far from its borders, and within 200 miles of countries like Vietnam and the Philippines.

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U.S. investors held 16.5% of the shares in CNOOC’s Hong Kong-listed unit as of Friday, creating potential for major outflows if they’re forced to divest, according to Henik Fung, an analyst with Bloomberg Intelligence. President Donald Trump signed an order this month barring American investments in Chinese firms owned or controlled by the military. The unit, Cnooc Ltd., fell 14% on Monday.

CNOOC also owns U.S. oil and gas fields, partners with companies like Exxon Mobil Corp. on international projects, and uses American technology and equipment. Any disruption along those lines would have a “huge impact” on the company, said Sengyick Tee, an analyst at SIA Energy in Beijing.

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CNOOC has been at the center of territorial disputes in the South China Sea since 2012, when it invited foreign drillers to explore blocks off Vietnam that Hanoi’s leaders had already awarded to companies including Exxon Mobil and OAO Gazprom. In 2014, the countries traded accusations that each other’s boats had rammed vessels, including around a CNOOC oil rig near the Paracel Islands.

About those disputes, a report from 2014 by the Peterson Institute for International Economics (PIIE) CNOOC's Offshore Energy Aspirations in the South China Sea:

However, since 2012, CNOOC’s attempts to move production further into the South China Sea have been at the center of territorial-related tensions between China and Vietnam. In 2012, CNOOC offered a series of nine oil exploration blocks to outside investors, which conflict with Vietnam’s territorial claims in the South China Sea (shown in orange below).

 

Now, with the possibility of a different administration in Washington, you can guess that the Chinese will not be idly sitting by to see whether this strategy of punishing China for its abuses of international law and its internal humanitarian abuses will continue. You can bet they'll be lobbbying hard to have these sorts of sanctions eliminated.

Oil Prices - A Russian Vulnerability?

Recent days have seen the reports of new discoveries of oil and gas, including off-shore UK:

Explorer Hurricane Energy has declared the “largest undeveloped

discovery” of oil on the UK Continental Shelf.

The Godalming-based group said well tests had confirmed its view that the Lancaster and Halifax reservoirs west of Shetland are actually a single resource.

Analysts have previously speculated that a single reservoir could hold more than one billion barrels of oil equivalent, although Hurricane did not make such a claim when announcing the discovery.

In Alaska, reports of a huge find, Massive Oil Discovery in Alaska Is Biggest Onshore Find in U.S. in 30 years:

Some 1.2 billion barrels of oil have been discovered in Alaska, marking the biggest onshore discovery in the U.S. in three decades.

The massive find of conventional oil on state land could bring relief to budget pains in Alaska brought on by slumping production in the state and the crash in oil prices.

The new discovery was made in just the past few days in Alaska’s North Slope, which was previously viewed as an aging oil basin.

Spanish oil giant Repsol and its privately-held U.S. partner Armstrong Energy announced the find on Thursday, predicting production could begin as soon as 2021 and lead to as much as 120,000 barrels of output per day.

The oil resources lie in a well, called Horseshoe, that’s 75% owned by Denver-based Armstrong. Repsol owns the rest of this well.

The existing U.S, oil wells have created a surplus of oil, forcing prices lower:

U.S. commercial crude supplies have risen for nine straight weeks, reaching a record 528.4 million barrels last week, according to the U.S. Energy Information Administration. That was an increase of 8.2 million barrels from a week earlier.

“The rising crude inventory levels in the US to new all-time highs has been the No. 1 reason why prices have been unable to move further higher,” Fawad Razaqzada, market analyst at Forex.com, wrote to investors Wednesday.

Recent price show crude trading at about $47 barrel and decreasing in price.

All of which suggests continuing trouble for countries whose economies are -um- very dependent on high oil prices to do all the things they want to do to, say, regain their empires.

As in Russia, which last year was having some issues, as Bloomberg noted in January, 2016, "How Cheap Oil Is Squeezing Russia's Economy"

Russia, which relies on oil and natural gas for almost half its fiscal revenue, ran a budget deficit of 2.6 percent in 2015, the highest in five years. It's now at risk of topping that level as prices drop even further, Finance Minister Anton Siluanov warned the government.

This year's budget was initially planned around oil averaging $50 a barrel and a deficit of 3 percent of gross domestic product. Belt-tightening measures totaling 1.5 trillion rubles ($18.9 billion) are needed to avoid a shortfall of over 6 percent of output this year, Siluanov said.
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As cheap oil weakens the Russian economy, it also causes its national currency, the ruble, to depreciate. That means Russian consumers have to shell out more rubles if they want to maintain their consumption levels.

Geopolitical tensions have added to the ruble's weakness. The currency has nearly halved in value since Putin's annexation of Crimea in March 2014 and the U.S. and the European Union imposed sanctions against Russia.

Now, there are reports that Russia is preparing its economy for $40/barrel oil, as in this Bloomberg report from 4 days ago, OPEC Be Warned: Russia Prepares for Oil at $40:

As the Organization of Petroleum Exporting Countries and its allies prepare to meet for a review of their production cuts this weekend, the central bank of the world’s biggest energy exporter is hunkering down for years of oil near $40 a barrel.
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Policy makers in Moscow said on Friday they see Urals at an average of $50 a barrel this year, but falling to $40 at end-2017 and then staying near that level in 2018-2019. As the central bank honed its forecasts, it also gingerly resumed monetary easing, pointing to the “uncertainty” in the oil market as a factor for its “conservative” forecasts.

Russia’s Finance Ministry similarly highlighted the $40 level in January when it announced that the central bank will start buying foreign currency on its behalf when crude exceeds that level in order to insulate the exchange rate from oil volatility. The price of $40 is additionally being used to calculate the country’s budget in 2017-2019.
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Forecasting oil is no game for the Bank of Russia. Its 65 percent plunge in 2014 and 2015 battered the nation’s currency, forced an emergency rate increase in the middle of the night and pushed Russia into recession. The share of oil and gas revenue was at 36 percent of budget income in 2016.

Now, there's another little bit of information that the Russians might find discomforting - with the U.S. having a excess inventory of crude, it's exporting more oil to new places, as set out here:

In 2016, U.S. crude oil exports averaged 520,000 barrels per day (b/d), 55,000 b/d (12%) above the 2015 level, despite a year-over-year decline in domestic crude oil production. Even though oil exports have increased, growth in U.S. crude oil exports has slowed significantly from its pace from 2013 to 2015, when annual U.S. crude oil production grew rapidly.
Following the removal of restrictions on U.S. crude oil exports in December 2015, the United States exported crude oil to 26 different countries in 2016, compared with 10 countries the previous year. In 2015, 92% of U.S. crude oil exports went to Canada, which was exempt from U.S. crude oil export restrictions. After restrictions were lifted, Canada remained the top destination but received only 58% of U.S. crude exports in 2016.
Aside from Canada, European destinations such as the Netherlands, Italy, United Kingdom, and France rank high on the list of U.S. crude oil export destinations. The second-largest regional destination is Asia, including China, Korea, Singapore, and Japan. In 2016, the United States exported to eight different Central and South American destinations, including Curacao, Colombia, and Peru.(emphasis added)

Is the U.S. liberating market share from the Russians? What impact does this have on the Russian economy?

Which country can ride out a "price war" without crippling 36 or 40% of its economy? The oil and gas industry in the U.S. is below 4% of its GDP.

Hmmm.

Fun with Iran: Iran "Naval Ambitions"

I think we've covered Iran's desire to control the flow of oil from the Middle East to the world before, but there is an interesting piece at Foreign Affairs by Yoel Guzansky, Iran's Growing Naval Ambitions: Why It Wants Naval Bases in Syria and Yemen that

In late November, Iran made an unusual announcement: it said it was planning to build naval bases in Syria and Yemen, which, as a state-run paper later posited, “could be ten times more efficient than nuclear power.” Although Iran has long striven to establish itself as a leading regional power, and naval outposts have been key to reaching that goal, this was the first time Tehran officially declared its intentions to build such bases beyond its own borders.

That "building bases" part is partially true because there was that time the Greeks beat the expansionist Persians back a couple of thousand years ago.

Ironic, I suppose that it was Greek sea power that played a key role in those Persian defeats, as it appears sea power is back in the Persian - uh- Iranian Islamic Republic Theocracy/Dictatorship vocabulary.

In any event, Mr. Guzansky notes:

The two bases would fit into Iran’s larger plan to expand its reach both regionally and beyond. Tehran is in the process of building up its presence along the coasts of the Persian Gulf and the Gulf of Oman, a policy that it also announced in November. “We are building two naval zones and three naval bases on the Makran coasts,” saidRear Admiral Habibollah Sayyari, commander of the Iranian navy, at a press conference in Tehran. “This is in line with our policy of making a return to the sea.” Sayyari highlighted plans to equip the Iranian navy with homegrown surface-to-surface missiles, sea-based drones, and intercept radars.

Sayyari also made mention, and not for the first time, of Iran’s goals outside its regional waters. “Beyond a doubt,” he said, “our naval fleets will, in the near future, circle Africa and cross the Atlantic.” He referred to the waters of East Asia as well. To further this goal, Iran is conducting visits to and joint naval exercises with countries in Africa and Asia. In May 2013, Iran’s navy paid a visit to the Chinese port of Zhangjiagang, and later that year, it sent two warships and a submarine to Colombo, Sri Lanka. In 2014, China reciprocated by sending, for the first time, two ships to the Iranian port of Bandar Abbas to conduct joint naval exercises, ostensibly focused on antipiracy operations. And in January of this year, Tehran dispatched an Iranian navy destroyer to the Indian port of Visakhapatnam, also to conduct joint naval drills.

See also Missile Attacks Off Yemen and the Iran- Saudi Proxy War for Oil Shipping Chokepoints:

Iran would like to control the Saudi outflow of oil. It can do so by shutting down Saudi access through the Strait of Hormuz except that the Saudi's can also export oil from their west coast on the Red Sea and ship it through the Bab el-Mandeb Strait. If the Iranian surrogate Houthis can gain control of the Bab el-Mandeb Strait then Iran could, effectively, throttle Saudi oil flow.

Not to mention controlling much of the oil flow to Europe and, if necessary, to the Far East. Useful bargaining chip, that oil/gas flow, as Russia has found out in its dealing with Western Europe.

Mr. Guzansky makes other excellent points:

A base in Syria, if it ever materializes, would stretch Iran's naval arm to the Mediterranean and strengthen the Iranian military presence near Europe’s shores. It would also help Tehran’s allies in Lebanon, Palestine, and Syria—Hezbollah, Hamas, and the regime of President Bashar al-Assad, respectively. A naval base in Syria would enable Iran to transport regular supplies and provide other assistance to Hezbollah without being dependent on overland convoys or aerial transport through Iraq or Turkey. The base would also make Iran less dependent on Sudan. Although Sudan has long served as a port of entry for Iranian weapons into the Mediterranean and Africa, Tehran’s African ally has been changing its policy in recent years and has moved closer to wealthy Saudi Arabia.
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If left unchecked, Iran could potentially develop the capacity to threaten crucial shipping lanes in the Caspian Sea and the Indian Ocean. As a result, Iran’s recent announcements of its plans to expand its regional presence to the Red Sea and the Mediterranean could spur cooperation between Israel, which is also seeking to curb Iranian influence, and the Arab world. For its part, the United States under President Barack Obama has shied away from confrontation with Iran in almost all instances. The U.S. Navy has chosen not to counter the increasing provocations in the Persian Gulf by Iran’s Islamic Revolutionary Guard Corps Navy. As of September 2016, there had been 31 “unsafe encounters” with Iranian vessels in the Persian Gulf, up from 23 in 2015, according to the U.S. Navy. The lack of action is costing Washington its credibility as a counterforce to Tehran.

Of course, while Iran plots its destruction of Israel and its positioning to threaten Europe, the world's energy picture keeps moving which may damage Iran's ability to pay for a meaningful naval expansion. Though with sufficient anti-ship cruise missiles, it seems easier for a land power to push sea forces further out to sea.

Europe is not without options for example

Norway is the world's third largest exporter of oil and gas after Saudi Arabia and Russia. In 2012, it accounted for about 31% of all the EU's natural gas imports and 11% of its crude oil imports. Norway also produces a large amount of hydroelectric power which can be exported to the EU in greater quantities if new grid connections are built.

There are several reasons for the "greening" of Germany, not the least of which would seem to be to free it from the clutches of either Russia or the Middle East powers.

Once again, the U.S. domestic production of oil and gas is vital to U.S. interests - see OPEC Fights U.S. Shale Oil, U.S. Shale Oil Hangs in There:

The U.S., according to the U.S. Energy Information Administration seems to be sitting pretty on shale:

Does the United States have abundant shale resources?
Yes, the United States has access to significant shale resources. In the Annual Energy Outlook 2014, EIA estimated that the United States has approximately 610 Tcf of technically recoverable shale natural gas resources and 59 billion barrels of technically recoverable tight oil resources. As a result, the United States is ranked second globally after Russia in shale oil resources and is ranked fourth globally after China, Argentina and Algeria in shale natural gas resources.

Nhanks to Mr. Obama, we now seem to be "warehousing" areas of potential development.

You might want to look at National Energy Security Issue: Effects of Cheap Oil

Suppose, for example, Russia decides to cut off natural gas supplies to Europe beginning in late 2016 using that gas as an economic weapon to force the nations dependent on Russian gas to accept Russian claims in the Ukraine or the Baltic States. One way for the West to resist this pressure is to have some assurance that the U.S. and its allies will be able to set into motion a stream of LNG ships carrying gas to replace that of the Russians, ameliorating the gas situation for those affected states. In addition to LNG shipping, a force of air and naval escorts protecting that LNG stream at sea might be required to prevent interference with the flow of gas in competition with that of the Russians.

Or, suppose the Chinese interfere with the flow of gas and oil through the South China Sea sea lanes to Taiwan,South Korea and Japan. Can the U.S. and Canada help mitigate the harm while alternative sea lanes that avoid the South China Sea are developed? Who will protect those shipments and how?

Or, what if Iran or someone else takes the big step of managing to destroy the Saudi oil production - say through using nuclear weapons - can the U.S. and non-Middle East producers step up and provide at least minimal supplies to the world now depending on Middle East oil?

Of course, speaking of naval power, all those shipping lanes would require adequate naval forces to protect them from interruption. Another reason to increase the size of the U.S. and allied naval forces.

UPDATE: Some people find Iran's suggested foreign port concept a "mirage":

Iran is doing enough damage in the Middle East through unconventional methods without requiring a robust navy. That is why an idea floated by a key Iranian military leader to build naval bases in Yemen and Syria makes absolutely no sense.

Mohammad Bagheri, the chief of Iran’s armed forces general staff, suggested last month that Tehran was interested in, “at some point,” establishing naval bases in Yemen and Syria. While such a move would reflect the Islamic Republic’s goal of dominating the region, constructing highly visible and defensible bases far from Iranian shores is not realistic.

I agree that "realism" and Iran's stated goals often vary widely.

Getting Out of the Gulf? Letting the Arabian Gulf Countries Fend for Themselves in Letting Oil Flow

Behind the pay wall at Foreign Affairs is this think piece by Charles L. Glaser and Rosemary A. Kelanic Getting Out of the Gulf: Oil and U.S. Military Strategy which is really not about military strategy, but about national strategy for the Persian Gulf. This means tracing our involvement back to President Jimmy Carter:

In January 1980, U.S. President Jimmy Carter used his State of the Union address to announce that in order to protect “the free movement of Middle East oil,” the United States would repel “an attempt by any outside force to gain control of the Persian Gulf.” Carter and his successors made good on that pledge, ramping up U.S. military capabilities in the region and even fighting the Gulf War to prevent Saddam Hussein’s Iraq from dominating the region’s oil supplies. Although Washington has had a number of interests in the Persian Gulf over the years, including preventing nuclear proliferation, fighting terrorism, and spreading democracy, the main rationale for its involvement has always been to keep the oil flowing.

The authors point out that the world has changed since 1980 and pose a multi-billion dollar question:

Is Persian Gulf oil still worth defending with American military might?

I should note that back in 2004, I posited the need to plan a curtailment of Middle East oil in Contingency Planning 101: Preparing for an world oil shortage:

[A]n oil shortage may impel more rapid adoption of alternative fuel sources, including natural gas, hydrogen, nuclear power. Coal, of which the U.S. has a lot, can be "gasified".

Gasification, in fact, may be one of the best ways to produce clean-burning hydrogen for tomorrow's automobiles and power-generating fuel cells. Hydrogen and other coal gases can also be used to fuel power-generating turbines or as the chemical "building blocks" for a wide range of commercial products.

The authors of the Foreign Affairs article suggest:

First, if the United States ended its commitment, how much likelier would a major disruption of Gulf oil be? Second, how much damage would such a disruption inflict on the U.S. economy? Third, how much does the United States currently spend on defending the flow of Gulf oil with its military? Finally, what nonmilitary alternatives exist to safeguard against a disruption, and at what price? Answering these questions reveals that the costs of preventing a major disruption of Gulf oil are, at the very least, coming close to exceeding the expected benefits of the policy. So it’s time for the United States to give itself the option of ending its military commitment to protecting Gulf oil, by increasing its investment in measures that would further cushion the U.S. economy from major oil disruptions. And in a decade or so, unless the region becomes far more dangerous, the United States should be in a position to actually end its commitment.

They suggest some sort of economic disruption:

Assessments of the U.S. economy’s sensitivity to oil prices also vary widely, but a reasonable estimate is that a doubling of the price of oil would shrink U.S. GDP by three percent—or approximately $550 billion. Of course, smaller disruptions would result in smaller economic losses, and the most catastrophic disruption—a long, complete closing of the Strait of Hormuz—would cause larger ones.

But the actual costs to the United States would be far smaller, because Washington could draw on the Strategic Petroleum Reserve, its emergency underground oil stockpile, to relieve the pressure on prices. The roughly 700 million barrels currently stored in the SPR form part of the more than four billion barrels held by members of the International Energy Agency (IEA), an organization founded in 1974 to coordinate collective responses to major oil disruptions.

What all of this means is that if the world experienced a massive disruption of oil from the Persian Gulf, a coordinated international release of various reserves could initially replace the vast majority of the daily loss. In all but the worst-case scenarios—far more severe than anything seen before—the impact of a severe disruption would be greatly cushioned.

What they do not discuss is the cushioning effect of the U.S.'s increased oil and gas reserves through the use of new drilling techniques and fracking - there is simply no mention in the article that the U.S. is thought by some to be the leader in energy reserves, as set out in in Oil Price.com's "U.S. Has World’s Largest Oil Reserves":

The U.S. holds more oil reserves than anyone else in the world, including Saudi Arabia, Russia, and Venezuela.

That conclusion comes from a new independent estimate from Rystad Energy, a Norwegian consultancy. Rystad estimates that the U.S. holds 264 billion barrels of oil, more than half of which is located in shale. That total exceeds the 256 billion barrels found in Russia, and the 212 billion barrels located in Saudi Arabia.

The findings are surprising, and go against conventional wisdom that Saudi Arabia and Venezuela hold the world’s largest oil reserves. The U.S. Energy Information Administration, for example, pegs Venezuela’s oil reserves at 298 billion barrels, the largest in the world. Rystad Energy says that these are inflated estimates because much of those reserves are not discovered. Instead, Rystad estimates that Venezuela only has about 95 billion barrels, which includes its estimate for undiscovered oil fields.

Some analysis is less aggressive in assessing U.S. reserves, because of a matter of "proven" reserves:

Proven oil reserves are those that have a reasonable certainty of being recoverable under existing economic and political conditions, with existing technology.

Let's parse that a little. The key part of the quote being "existing economic and political conditions," which exactly what we have seen play out with the reserves unleashed by fracking and unconventional technology being applied to the oil patch - as the price of oil from outside the U.S. rose, the ability and affordability of U.S. drillers to develop fields not cost effective under lower prices also rose. Now, as experience in using such techniques has grown, that "price point" has dropped, much to the regret of OPEC, which no longer has real cartel power over oil prices. See Why OPEC can't stop the shale oil industry:

Just as a cartel benefits from cutting output to raise price, it suffers from raising output to lower price. This would not be true if it could permanently eliminate competitors by temporarily lowering prices, but that is not the case here. The shale oil industry is resilient and flexible – just as it can be pushed out of the market by very low prices, it can promptly get back into the market when prices improve. So an extended attempt by OPEC to close down the shale industry is a lose-lose situation, and as such is very unlikely to happen.

Perhaps this is a minor quibble, concerning the article, but the point I am attempting to make is that the economic impact of U.S. withdrawal from the Gulf may not be anything close to what is predicted in the article. In fact, it may further increase U.S. development of its own reserves and in alternatives (hydrogen fuels?) which may not be cost-effective in "existing economic and political conditions, with existing technology" but which may spur new technology and which would certainly increase American jobs for Americans, which, after all, is a pretty important governmental concern.

Now, let's circle back a little.

The U.S. government, in part due to the "Carter Doctrine", has maintained a very expensive presence

in the Arabian Gulf.

The authors of the article pose the right questions - "Is it still in the U.S. interest to expend any effort in guarding those oil sea lines of communication that flow out of the Arabian Gulf? In whose vital national interests is it to keep sending aircraft carriers and other ships to attempt to preserve the status quo in the Arab/Persian Middle East? Is it time for the U.S. to remove itself from the Gulf? Whose interests would be served by our doing so?"

Would Iran establish the regional hegemony it seems to so strongly desire? Would the Chinese rush in to replace the U.S.? Or would the Chinese be concerned that the U.S. might suddenly free up a large portion of its Navy to be deployed to other areas that, 36 years after Mr. Carter's speech, are now of much greater interest to the U.S.?

I would argue that the new administration should take a close look at these issues and at the issues raised by the "You broke it, you fix it" attitudes in Iraq and Afghanistan. We have thrown a lot of time, talent and money into trying to convert those states into something that looks like us. It is time to rethink our goals and leave the inhabitants of the region to sort themselves out? Are we doomed to play Sisyphus and keep trying to push uphill the burden that no one in the area seems ready to take up? Is it time for us to engage in a little "benign neglect" and back off?

Is it time to postulate a policy built more on "punitive expeditions" than on nation building? See Intervention in International Law (1921) (pdf):

When the territorial sovereign is too weak or is unwilling to enforce respect for international law, a state which is wronged may find it necessary to invade the territory and to chastise the individuals who violate its rights and threaten its security.

Had we smashed the Taliban in Afghanistan for their support of al Qaeda and then left with a stern warning that we would come back again should they continue in their evil ways, would we have been better off?

If we had gone after Saddam Hussein in 1991 and punished him for his violations of international law, would we have had to go back?

With a new administration coming, now is the time to ask such questions, and set national strategy accordingly.

Laughing Matter: "The Great Green Fleet"

Fighting "climate wars" by using beef tallow to power the fleet as gushingly reported here

The Great Green Fleet is a Department of the Navy initiative highlighting how the Navy and Marine Corps are using energy efficiency and alternative energy to increase combat capability and operational flexibility. At the close of the ceremony, the Arleigh Burke-class guided missile destroyer USS Stockdale (DDG 106) left the pier to begin its deployment, becoming the first U.S. Navy ship running on an alternative fuel blend as part of its regular operations.

"When it comes to power, my focus has been about one thing and one thing only: better warfighting," said Mabus. "The Great Green Fleet shows how we are transforming our energy use to make us better warfighters, to go farther, stay longer and deliver more firepower. In short, to enable us to provide the global presence that is our mission."

The blend fueling the JCS CSG's surface ships contains alternative fuel made from waste beef fat provided by farmers in the Midwest. It was purchased at a cost-competitive price through a partnership between the Department of the Navy and U.S. Department of Agriculture (USDA) aimed at making alternative fuel blends a regular part of the military's bulk operational fuel supply.

With the USS John C. Stennis (CVN 74) and Stockdale in the background, Mabus and Vilsack explained why this milestone alternative fuel purchase is important to the Navy and Marine Corps, and how it supports America's farmers, ranchers and rural manufacturing jobs.

Mabus said, "Diversifying our energy sources arms us with operational flexibility and strengthens our ability to provide presence, turning the tables on those who would use energy as a weapon against us."

"The Navy's use of renewable energy in the Great Green Fleet represents its ability to diversify its energy sources, and also our nation's ability to take what would be a waste product and create homegrown, clean, advanced biofuels to support a variety of transportation needs," said Vilsack. "Today's deployment proves that America is on its way to a secure, clean energy future, where both defense and commercial transportation can be fueled by our own hardworking farmers and ranchers, reduce landfill waste and bring manufacturing jobs back to rural America."

So, vote buying, then.

The most energy efficient, non-CO2 emitting ship mentioned in the article is Stennis which is nuclear powered.

Given that Stockdale is gas turbine powered, the number of alternative fuels is not very limited. As noted here (pdf):

In broad terms, gas turbine fuels can be classified as gaseous or fliuid. Common gaseous fuels include:
• Natural gas
• LNG
• LPG
• Refinery gas
• Coke oven gas
• Coal gas
• Hydrogen
Liquid fuels include:
• No. 2 diesel
• Kerosene
• Jet A
• Naphtha
• Condensates
• Ethanol and methanol
• Heavy residual-grade oils and crude oils

You should also note that the price of crude oil is today below $30 barrel and the U.S. has a plentiful domestic supply as well as a enormous supply of natural gas.

Of course, those supplies are mostly in "red states" like Texas and so the jobs provided by the oil and gas industry don't appear to count as much as jobs "in rural America" wherever that is, though Texas and other oil producing states seem to have a lot of "rural" in them to me.

I'm really interested in the logistics train  that will have to follow Stockdale if the intent is to keep the ship running on this blend for an entire deployment. Will she have her own tanker carrying this "special fuel" or what? What does that add to the operating costs of the fleet and who is paying for it (other than the taxpayers)?

I might be wrong, though, so you can read all about the Great Green Fleet here.

Good stuff here in a Reuters report:

The U.S. Navy will formally deploy its so-called "Great Green Fleet" on Wednesday, sending warships to sea on biofuels even though oil prices have dropped 70 percent since congressional Republicans first criticized the high cost of alternative fuels.

Navy Secretary Ray Mabus told Reuters the deployment is the next step in a fleet-wide effort that has seen the Navy cut its oil consumption by 15 percent since he took charge in 2009 and the Marine Corps curb its use by 60 percent.

A focus on energy and energy-saving technology gives the U.S. Navy a military advantage, Mabus said. An amphibious assault ship like the USS Makin Island, which uses a dual electric-diesel propulsion system, can stay on station three times longer than a conventionally powered vessel, he said.

“It gives us an edge tactically, it gives us an edge strategically,” Mabus said. “It keeps … fuel from being used as a weapon against us.”
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Mark Cancian, an analyst at the Center for Strategic and International Studies and former White House budget official, said the initiative is as much about environmental symbolism as cost savings or tactical advantage.

Many congressional Republicans objected three years ago when the Navy sought and won support for defense subsidies to help three private firms build biofuel refineries. With oil now selling around $30 a barrel, that skepticism remains.

"They have not changed their position, which is that these are too expensive and not needed," Cancian said.

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The Defense Department uses about 14 million gallons of fuel a day, with the Navy responsible for about a quarter of that, according to figures from the Defense Logistics Agency.

When the Navy first tested biofuel versions of marine diesel and jet fuel in 2012, it spent eye-popping sums for small amounts.

In one case it paid $424 a gallon for 20,055 gallons of biofuel based on algae oil. In another it spent nearly $27 per gallon for 450,000 gallons of biofuel, later mixed into a 50-50 blend. The $15-per gallon-cost was four times the price of conventional fuel at the time.

The fuel being used for the Great Green Fleet deployment is a competitively priced blend of 90 percent diesel and 10 percent biofuel based on a beef tallow feedstock, Navy officials said.

A California firm, AltAir Fuels, is contracted to supply 77 million gallons of the fuel between Oct. 1, 2015, and Sept. 30, 2016.

The Navy pays $2.05 per gallon, thanks in part to a subsidy of 15 cents per gallon from the Commodity Credit Corp., a government-owned enterprise that supports farm products.

With fracking and all the new recovery techniques, it seems the issue of bad guys using "fuel as a weapon" is a ship that has sailed.

But "environmental symbolism?" That's a nice turn of phrase.

Caspian Sea: Oil Issues and Iran, Russia, Azerbaijan, Turkmenistan, and Kazakhstan

Click on map to enlarge

So on yesterday's Midrats Episode 286: A Restless Russia and its Near Abroad with Dr. Dmitry Gorenburg, we had a little discussion about the status of naval forces in the Caspian Sea (beginning about 44:37).

Claude Berube tweeted this morning about an article which described Azerbaijan's new Caspian Sea Naval Base.

Now, from the Oil and Gas Journal comes Iran yields to Russia in talks over Caspian resources:

Iranian acquiescence to Russia, to which the Islamic Repubic increasingly turns in response to pressure from the West, has become a standard feature of long-unresolved deliberations over jurisdiction and resource ownership in the Caspian Sea. Iran has surrendered its Soviet-era claim to half of the world's largest inland lake and has aligned itself with Russian insistence that countries lacking Caspian shorelines-especially from the West-stay out.
***
The status of the Caspian Sea fell into question with the demise of the Soviet Union. The three littoral republics that emerged from that change demanded larger shares of the Caspian than allotted to them by treaties negotiated in 1921 and 1940, which granted the former Soviet Union half of the sea and Iran the remainder.

Much is at stake. The Caspian Sea, usually referred to as the boundary mark between Asia and Europe is not only rich in oil and gas; it also produces more than 80% of the world's sturgeon. After the collapse of the Soviet Union, the large South Caspian Basin became available to investment by western oil companies seeking exploration and production opportunities.

Caspian border countries all produce and export oil and natural gas, and all claim shares of Caspian resources. Azerbaijan is the hub for export of Caspian gas to western markets. Access to Caspian gas has been central to efforts by the European Union (EU) to diversify its members' gas purchases away from Russia.

International oil companies have been developing oil and gas in the deep basin of the Caspian Sea since the region became accessible to outside investment about 2 decades ago. The formation of Azerbaijan International Operating Co. opened a new era for development. The 1994 signing of the contract known as the "Contract of the Century," as US Sec. of Energy Samuel Bodman called it, allowed Azerbaijan oil to reach global markets for the first time a decade later via the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Throughout this new era, Russia has tried to steer movement of Caspian oil and gas through its territory to keep control of the region's transport infrastructure. In 2005, more than two thirds of all crude oil exported from the Caspian moved through the Caspian Pipeline Consortium (CPC), operated by Russia. By 2010, Russia's share of Caspian oil transport had fallen below 40%.

The whole article requires a subscription, but what I've put up does give a sense of why there is a naval build up in the area.

More from that article Claude referenced:

In Azerbaijan's case it is particularly worried about Iran, with whom it has had a number of minor incidents. In the longer term it is worried about Russia, which strongly opposes the construction of a trans-Caspian gas pipeline from Turkmenistan, which Baku in principle supports. Russia also has tried to get all the littoral states to restrict the militaries of outside powers (meaning, the U.S.) from getting involved on the Caspian, which Baku has pushed back on. Nevertheless, Russia and Azerbaijan are slated to carry out their first-ever joint naval exercises in September.

For a change, the U.S. probably won't send a fleet to the area . . .

Oil Prices

UPDATED: An interesting audio discussion of declining oil prices from the folks at The Economist at this link (autorun video replaced by link).

Are the Saudis trying to hurt others in the market? Russia? Iran? Venezuela? U.S. shale producers? Can they do it in the long run? Short term benefit to consumers, but it pushes the smaller oil producers toward a decline as prices drop below production costs. More analysis here:

The growing oil glut has already had reverberations around the world, as oil producing nations attempt to balance their books based on the gloomy new forecasts.

Reminds me of the early 1980s, which were not much fun in the oil patch, but good for the rest of the economy.

Oil Matters: Iran Is Thinking of Oil Terminal Outside the Arabian/Persian Gulf

Most of Iran's ability to get oil and gas products to the world outside the Arabian/Persian Gulf can be blockaded by putting a "stopper" in the entrances to the sea line of communication chokepoint that is the Strait of Hormuz. That "stopper" could be naval forces or mines or air power sufficient to threaten shipping trying to leave the A/P Gulf.

To an extent, the great worry to many of those outside of Iran who rely on shipments of oil and gas from the area has been that Iran might place its own cork in the mouth of the Gulf and cut off vital supplies, creating an international energy shortage and chaos in energy markets.

Other oil and gas producing states in the A/P Gulf have taken steps to reduce the risk of economic harm caused by Iranian action by developing alternative paths (by which I mean pipelines) to carry products away from the Gulf and the Strait of Hormuz. See the nearby map of such alternatives. Click on it to enlarge it.

Iran's potential to close the Strait of Hormuz is a double-edged sword, however, because a truly effective Iranian cork (perhaps using mines) in the Strait of Hormuz might also hobble the Iranian oil and gas export business which is also dependent on an open Strait. This limitation affects the ability of Iran to apply "energy supply" leverage on the world to get what it wants.

This Iranian dependency on an open Strait also constitutes a powerful strategic lever against the Iranian government when international disputes arise. Due to the alternative export routes developed by its neighbors and that are currently unavailable to Iran, it is possible that through - a blockade or other action closing the Strait to it - Iran could be boxed in the Gulf with oil and gas but no way to get it to market. No sales of such products could wreak havoc on the economy of Iran. A Iranian economy that gets bad enough could lead to internal strife in Iran and an overthrow of the present "republic."

Recognizing this problem, Iran is pondering a way to build itself a way out of this "box." One possibility is to set up an oil and gas port outside of the chokepoint Strait of Hormuz. The Tehran Times reports on just such a plan, in "Iran to invest $2.5b to build oil terminal at Sea of Oman port" :

Iran is planning to invest $2.5 billion to build a new crude oil export terminal at Jask Port on the Sea of Oman, bypassing the strategic Strait of Hormuz, the only way in and out of the Persian Gulf, the managing director of the Iran Oil Terminals Company announced on Saturday.

Most of Iran’s exports are funneled through the big terminal on Kharg Island in the northern Persian Gulf, then shipped southward in supertankers through the Strait of Hormuz, the Mehr News Agency quoted IOTC Managing Director Pirouz Mousavi as saying.

Iran also plans to lay a pipeline running from the Caspian Sea in the north to Jask, Mousavi added.

An older look at Iran's oil and gas infrastructure (2004)

Since a large number of joint oil and gas fields are located in the Persian Gulf, such a terminal will help the country expedite oil storage and export operations, he stated.

The Jask oil terminal will be comprised of storage facilities with a total capacity of 20 million barrels, loading and unloading docks, as well as onshore and offshore facilities, Mousavi said.

Iranian President Hassan Rouhani said in a meeting with domestic researchers in Tehran on Saturday that the diversification of oil export routes is one of the most strategic policies of his administration.


Mohsen Qamsari, the deputy director for international affairs of the National Iranian Oil Company, recently said that Iran is exporting an average of one million barrels of oil per day based on the November 2013 interim nuclear deal with the 5+1 group (the United States, Britain, France, Russia, China, and Germany).

Under the deal, the six countries undertook to provide Iran with some sanctions relief in exchange for Iran agreeing to limit certain aspects of its nuclear activities.

The two sides agreed to extend the nuclear talks until November 24, with a view to achieving a permanent accord.

Iran produced 2.762 million barrels of oil per day in July, the Organization of Petroleum Exporting Countries (OPEC) said in its latest report. (emphasis added)

Bandar-e-Jask Area

So, Iran is sitting on a million+ barrels of oil that it can't legally export under its agreement in the interim nuclear deal.

It needs an alternative path for its oil and gas. It has a small port at Jask on the Gulf of Oman - so . . . it has now floated a plan to enlarge that port and get an alternative out of the Gulf.

The arrow on the nearby map points to Jask.

Jask is also home, since 2008, to an Iranian naval base which it has asserted gives it the ability control the Strait of Hormuz:

"We are creating a new defence front in the region, thinking of a non-regional enemy," Adm Sayyari told state run Iranian radio.

"In this region we are capable of preventing the entry of any kind of enemy into the strategic Persian Gulf if need be," he said.

Is this proposed oil port real? If so, is it a sound and smart strategic plan or a bargaining chip for the nuclear talks? Or both?

South China Sea: China and Vietnam Heat Up the Waters

Headlines read Vietnam and China face off in South China Sea:

Vietnam said on Wednesday a Chinese vessel intentionally rammed two of its ships in a part of the disputed South China Sea where Beijing has deployed a giant oil rig, sending tensions spiraling in the region.

The foreign ministry in Hanoi said the collisions took place on Sunday and caused considerable damage to the Vietnamese ships. Six people sustained minor injuries, it said.

"On May 4, Chinese ships intentionally rammed two Vietnamese Sea Guard vessels," said Tran Duy Hai, a foreign ministry official and deputy head of Vietnam's national border committee.

"Chinese ships, with air support, sought to intimidate Vietnamese vessels. Water cannon was used," he told a news conference in Hanoi. Six other ships were also hit, other officials said, but not as badly.

Dozens of navy and coastguard vessels from both countries are in the area where China has deployed the giant rig, Vietnamese officials have said.

"No shots have been fired yet," said a Vietnamese navy official, who could not be identified because he was not authorized to speak to media. "Vietnam won't fire unless China fires first."

By the way, this may not the first time that Vietnam and China have had a set to over an offshore oil rig. Way back in 1983, there was tension between the two countries over off-shore drilling. The clipping to the left reports on part of the issue.

More on the Glomar Java Sea here.

UPDATE: You can review the pdf of the U.S. Coast Guard report on the loss of Glomar Java Sea here. Some of you may recall there were questions of whether a Vietnamese vessel had rammed the vessel at some point, perhaps weakening its hull and contributing to its loss. There were also reports that some of the crew had been taken ashore. The CG report addressed some of these issues at page 19:

UPDATE2: Vietnam's side of the story:

The information was released by Rear Admiral Ngo Ngoc Thu, vice commander of the Viet Nam Marine Police at the international press conference in Ha Noi on Wednesday afternoon.

He said that Chinese ships intentionally crashed into and caused damages to the vessels of the Vietnamese marine police and fisheries surveillance force right in Viet Nam’s exclusive economic zone and continental shelf though the Vietnamese forces exercised restraint over the perverse acts of Chinese ships.

The rear admiral also showed footage provided by the Vietnamese fisheries surveillance force of a Vietnamese boat being besieged by Chinese ships during a clash. Mr. Thu said six Vietnamese people have been injured.

Speaking at the press conference, Spokesperson of the Vietnamese Ministry of Foreign Affairs Le Hai Binh said that China’s acts violate Viet Nam’s sovereignty and jurisdiction over the Southeast Asian country’s exclusive economic zone and continental shelf as stipulated in the 1982 UN Convention on the Law of the Sea.

Earlier on May 6, Deputy PM, FM Pham Binh Minh made a phone call to Chinese State Councilor Yang Jiechi after China illegally deployed a drilling rig and vessels in the oil and gas lot 143 belonging to Viet Nam’s continental shelf since May 1.

Deputy PM, FM Minh stressed that China’s unilateral deployment of the drilling rig HD-981 and a large number of vessels, even military ones, in this area is illegal, runs counter to the international law and practices, seriously violates Viet Nam’s sovereignty over Hoang Sa archipelago and sovereign right and jurisdiction over Viet Nam’s exclusive economic zone and continental shelf.

This act negatively impacts mutual political trust and cooperation aspects between the two countries and hurts the Vietnamese people’s sentiment.

Viet Nam cannot accept and resolutely protests the China’s act and demands China totally withdraw the drilling rig HD-981 as well as escort vessels from this area, together with Viet Nam to join talks to handle the related differences.

UPDATE3: More here. Photos of action are from Vietnamese Marine Police.

UPDATE4: Good stuff at USNI News.

South China Sea: China Keep Raising Heat Over Disputed Island Claims

China keeps throwing its weight around in the South China Sea, bullying smaller countries and, according to the U.S., acting in violation of various "stand-still" agreements pending legal resolution of ownership of disputed islands. Most of the current situation is set out in US hits ‘provocative’ China move on Philippine ships :

The United States on Wednesday accused China of raising tensions by blocking two Philippine vessels as it urged freedom of navigation in the tense South China Sea (West Philippine Sea).

The United States, a treaty-bound ally of Manila, said it was “troubled” by Sunday’s incident in which China prevented movement of two ships contracted by the Philippine Navy to deliver supplies and troops to the disputed Second Thomas Shoal.

“This is a provocative move that raises tensions. Pending resolution of competing claims in the South China Sea, there should be no interference with the efforts of claimants to maintain the status quo,” State Department spokeswoman Jen Psaki said.

The Philippine government has taken to the air to resupply its forces, as set out in "Manila air-drops supplies to troops on disputed South China Sea reef":

Beijing claims Manila is trying to start construction on the disputed reef after it ran aground an old transport ship in 1999 to mark its territory and stationed marines on the ship. Manila claims the Shoal is part of the Philippine's continental shelf.

"We only intend to improve the conditions there, we have no plans to expand or build permanent structures on the shoal," said a Philippines navy official, who declined to be identified because he was not authorized to speak to the press.

"On Monday, we sent a navy Islander plane to drop food and water, but it will only last a few days. We really have to send back the civilian boats. Since last year, we've been resupplying our troops using civilian ships to avoid confrontation and this was the first time China blocked them."

Both sides are exchanging "strongly worded notes" and pointing fingers.

Intentionally grounded Philippine ship in dispute

So far as is known, however, the Philippines has not blocked resupply efforts to any Chinese troops enjoying their tours on the various small reefs in dispute.

Why all the fuss? As noted here:

The Second Thomas Shoal, a strategic gateway to Reed Bank, believed to be rich in oil and natural gas, is one of several possible maritime flashpoints that could prompt the United States to intervene in defense of Asian allies troubled by increasingly assertive Chinese maritime claims.

Of note from the same Reuters article:

Ernest Bower of the Center for Strategic and International Studies think tank said new pressure on Manila could be due to China's perception that the United States has shown weakness in dealing with crises in Syria and Ukraine and will be similarly lacking in resolve in Asia - in spite of its declared policy "pivot" to the region.

An interesting look at the situation in 2013 at Aksharadhool.

And a map of interest concerning potential offshore oil and gas fields (from here):

Energy needs rule the waves.

Help Your Congressperson to Lower Your Gasoline Prices -Tell Them to Repeal "Renewable Fuel Standard" Mandates

From the Oil and Gas Journall, a little truth in why adding more ethanol to gasoline is a bad idea on a number of fronts:

. . . Congress set mandates for fuel ethanol far in excess of what the market safely and economically can use.

It did so under political pressure from agricultural interests. The ethanol mandate has been great for growers and distillers of corn.

For anyone else who buys fuel or food, it costs too much. And it will get worse.

The statutory requirement for ethanol from grain soon will exceed the gasoline market's capacity to use it at normal blending levels. Refiners and other blenders must buy credits to make up the difference. Prices of the credits are rising.

Meanwhile, a requirement for ethanol from cellulose is phasing in, although that material remains scarce. Blenders unable to meet sales mandates must pay fines.

Producers of gasoline thus face rapidly rising costs and have a growing incentive to export product rather than sell it domestically. Rising costs and diminished supply promise increasing prices at the pump.
...
The program is a disaster—and not because ethanol is bad stuff. It's a disaster because Congress, in order to make those grain growers and distillers happy —meaning rich— tried to outwit the market.

This never works. And it's inevitably corrupt.

A bipartisan bill to repeal the Renewable Fuel Standard, as this fiasco is known, was introduced in the House in April. Now a group of Democrats and Republicans has introduced similar legislation in the Senate.

With consumers in jeopardy, the end of the RFS can't happen soon enough.

It won't remove ethanol from gasoline. It will, however, bring the amount of food burned in US vehicle engines back to rational and affordable proportions.

We have lots of natural gas, which burns cleaner than gasoline and doesn't "burn food." Perhaps this idiotic "Renewable Fuel Standards" effort is a backhanded way to encourage the market to expand NG availability for cars and truck and to help vehicle owners make the switch. Probably not,though, considering the source of the legislation.

According to an Exxon report, vehicles powered by natural gas have a 25% higher initial cost and is less "energy dense" so it may require more frequent fill-ups and other issues. However, these seem to be technological issues and I suspect that higher levels of production of NG vehicles would drive the price down and the availability of refill stations to expand. In addition, NG carries a lower price than gasoline so it is possible to recover the extra costs in a lifetime (unlike,say, with a hybrid car) . . . see here:

With so much supply that energy companies are pulling rigs out of the ground to cut back on production, natural gas is starting to look more appealing as a cheaper and cleaner alternative to gasoline and diesel.

As much as I hate to agree with Boone Pickens NG may be the way to go. And it may help remove one more seed of corruption in Washington.

Global Energy: Russian Offshore Exploration

Reported by Ocean News, announced planned offshore Russia oil and gas exploration, including in the Barents Sea and the Sea of Okhotsk here:

Statoil will fund 100% of costs in the exploration phase, which includes an obligatory work program of six wildcat wells to be drilled during the period 2016-2021.

A fiscal reform package providing incentives for the development of Russian offshore , including through geological survey, was outlined in a Russian government decree of April 2012. Enactment and implementation of these measures will facilitate the conduct of more capital intensive exploration work.

According to this,

The Shareholder and Operating Agreements are identical for the four license areas. Rosneft will have an equity share of 66.67% in each of the operating joint ventures and Statoil´s share will be 33.33%. Statoil will fund 100% of costs in the exploration phase, which includes an obligatory work program of six wildcat wells to be drilled during the period 2016-2021.

Statoil is a Norwegian company with world-wide operations. Rosneft is a Russian company, 75% state owned.

More:

The Perseevsky license block is located in the western part of the Barents Sea. Prospective recoverable resources stand at over 2 bln toe.

The Magadan 1, Lisyansky and Kashevarovsky license blocks are located in the northern part of the Sea of Okhotsk. Prospective recoverable resources at these fields stand at over 1.4 bln toe.

One more step in the Arctic.

Who is "Big Oil?"

From the Wall Street Journal:

Some Countries Offering "Insurance" Money for Evading the Iranian Sanctions

Short report from PennEnergy on a couple of countries offering "insurance" money to support tankers which evade economic sanctions against Iran at India offers $50MM in coverage for Iranian tanker runs:

Indian oil transportation companies will be able to receive some limited coverage from the government for oil tankers making trips to Iran, according to Reuters. The recent sanctions imposed against Iran for its continuing efforts to develop its nuclear program, and as many Western nations fear nuclear weapons, have largely prevented Indian oil companies from finding insurance for their oil ships.
***
In response, the Indian government has offered to insure as much as $50 million for any "Indian flag carriers" traveling to Iran. This amount falls well short of the actual liability incurred by oil tankers on any given trip, but it comes to more than six times as much as the Japanese government has offered its companies, illustrating India's interest in continuing the flow of Iranian oil.

Insurance Insight provides some background:

The concern for Asian nations such as India, China and Japan has been that their ships, which are highly dependent on the International Group of Protection & Indemnity Clubs and its reinsurance programme, will be unable to sail if they cannot obtain cover.

Another Insurance Insight report on limitations placed by Japanese insurers on tankers carrying Iranian crude:

Japanese oil buyers will be forced to coordinate schedules after insurers warned they will cover only one tanker transporting Iranian oil at a time after the 1 July sanctions deadline.
***
According to Reuters, the three insurers together can provide only up to ¥30bn ($370m) at one time in hull and machinery cover, which protects vessels against physical damage, without relying on the European reinsurance market to hedge the risk.

This is enough to cover insurance for only one tanker travelling in the Gulf with Iranian crude oil, Insurance Insight understands.

So, India and Japan as "sanction busters?"

Earlier report here, where China is added to the list of Iranian oil carriers.

Iran: Increases oil storage capacity on Kharg Island "to foil EU sanctions"

Kharg Island from space (2002)

Well, it's an Iranian Press TV report, so it doesn't need to make sense, I guess, but the logic of "Iran increases oil storage capacity to foil EU sanctions" is elusive to me.

Storing more oil on an island does not seem like way to make sanctions go away - at least in my world:

Managing director of Iranian Oil Terminals Company (IOTC) Seyyed Pirouz Mousavi said on Monday that in order to reduce the impact of the European Union sanctions on Iran’s oil sector, the country has re-commissioned a new storage facility at the Kharg Island oil terminal which can hold as much as one million barrels of crude.

The official added that increasing oil storage capacity will improve oil production and export conditions.

He stated that overhauling the facility has been carried out by domestic contractors and manufacturers, adding that Iran owes 70 percent of the increase in its oil storage capacity during the current Iranian calendar year (ending March 20) to domestic manufacturers.

Mousavi had announced earlier that Iran is capable of storing crude oil in the Persian Gulf for a period of 10-12 days, adding that the figure should hit 30-40 days by building the new storage facilities.

International experts believe that increasing oil storage capacity will improve Iran's position in marketing and selling crude oil.

The country started building its first private oil terminal capable of holding 8 million barrels of oil in the Genaveh port city in January.

The Kharg oil terminal is currently handling about 98 percent of Iran's crude exports and the island has more than 40 storage facilities capable of holding a total amount of 22 million barrels of crude oil.

Iran has also started building four new storage facilities on Kharg Island with the overall capacity of 4 million barrels of crude oil.

Dude, you've just designated a "target rich environment" to the rest of the world.

You won't see  it coming, Seyyed!

Nice little oil storage island you've got there, Seyyed Pirouz Mousavi. Be a shame if anything happened to it. Let's see, how much of your pitiful economy is based on exporting oil?