The year opened with no let-up in the violence in Iraq. At the beginning of February, more than 130 were killed by a bomb in a Shi’i district of Baghdad, following a year in which some 35,000 civilians were killed, according to a UN estimate. US President George W Bush announced that extra troops are to be sent to Iraq in an attempt to bring the situation under control. Product shortages inside Iraq were made worse by attacks on downstream installations and the temporary suspension of product deliveries by Tur-key. The Turkish government had objected to an Iraqi request for it to liaise with officials in the Kurd-ish-controlled region of northern Iraq over delivery schedules. Ankara refused to deal with the Kurdish regional authorities on the grounds that it was op-posed to all forms of regional autonomy for Kurdish groups. Baghdad meanwhile is trying to re-establish some form of central control over the oil industry in the Kurdish north to prevent it from unilaterally sign-ing contracts with foreign oil companies and to en-sure that a proportion of any oil revenues generated in the north is remitted to the central government. Fig-ures released by the Oil Ministry showed that oil ex-ports rose by 7% in 2006, to 1.52 mn bpd, though exports from the northern fields fell by 8%, compared with the previous year, to 38,000 bpd as sabotage to pipelines and other facilities continued. The govern-ment of Kuwait has launched an official investigation into allegations of irregularities over the sale of re-fined products by the Kuwait Petroleum Corporation to the US Army in 2003.

Violence has flared-up once more in the oil-producing regions of the Niger Delta as local groups continue their campaign to prevent oil revenues being siphoned-off to the north of the country. A spate of kidnappings of foreign oil workers broke out in Janu-ary, whilst communal violence in Nigeria’s Rivers State forced Shell to evacuate staff and shut three wells producing around 175,000 bpd of oil. Mean-while, a report from the Department of Petroleum Resources revealed that Nigeria’s four refineries op-erated at just 16% of their total capacity of 440,000 bpd in the fourth quarter of 2006 as a result of the unrest in the Delta and the poor quality of some of their equipment.

The European Commission unveiled a series of pro-posals designed to cut emissions of carbon dioxide and to improve the EU’s energy security. The meas-ures included a proposal that 10% of EU fuel should be biofuel by 2020, compared with 1% now. The Commission also proposed the setting-up of several new energy committees to look at a range of topics including stockpiling, demand and supply, energy technology and pricing. Concerns were raised in Europe about energy security when Russia suspended oil deliveries to Central Europe via Belarus in a dis-pute over the price of energy supplied to Belarus by Russia (see ‘Looking Ahead’). The US saw further interruptions to oil deliveries from Alaska when the 800,000 bpd Trans-Alaska Pipeline was temporarily closed because of a leak.

Beijing has ended the state monopoly on crude sales and the wholesaling of products within China, though companies taking part must still be licensed by the government. Indonesia is to reduce the sul-phur content of its gasoil from 0.50% to 0.35% from March, overruling objections from the national oil company, Pertamina on the grounds that it is not yet able to meet the new specification. BP is to sell its last remaining UK refinery, at Coryton, to the Swiss refining company, Petroplus. The British company has also been criticized for its poor safety practices at its Texas City refinery, where 15 workers were killed in an explosion in March 2003. Ireland’s only refin-ery, Whitegate, has been put up for sale by Conoco-Phillips. Petrobras has revised the estimated cost of two new Brazilian refineries upwards by 40% owing to higher world steel prices. The Jordan Petroleum Refinery Company is seeking a foreign partner to as-sist in the $1 bn expansion of its 90,000 bpd Zarqa refinery. Iran has approved two private refineries at Qeshm. Yemen will begin work on a 50,000 bpd re-finery at Ras Issa this year. China will boost its dis-tillation capacity by 160,000 bpd during the first quarter. Nova Scotia is trying to revive plans for an export refinery and Rosneft is to build a new refinery at Tuapse on the Black Sea.

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© Blackwell Publishing Ltd, 2007

under way are a major gas project at Camisea and a 100,000 bpd heavy crude development. Peru’s presi-dent, Alan Garcia, has criticized Evo Morales’ propos-als to nationalize Bolivia’s energy industry. Both

Peru and Colombia probably hope to benefit from of-fering more investor-friendly upstream terms than their more nationalistic neighbours.

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Iraqi violence, Nigerian chaos and some EU proposals

This section summarizes downstream developments of the previous month. Exploration & Production are covered in ‘Upstream Review’.