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09 August 2014

Press review 09-08-2014 - Beholding cahos in confort

Iraq is back to the front pages and for the wrong reasons. In another twist of events, the Islamic State (IS) started attacking cities in the autonomous Kurdish region, openly engaging - and defeating - the peshmerga. What had so far been a safe heaven for non-Sunni refugees has suddenly turn into hell.

The IS is now pushing in three different fronts: to the west in Syria, to the north-east against the Kurds and to the south-east against the Shiites; it still holds the initiative in all of these. This is the most serious war of the XXI century, for its barbaric nature, for the large territories it extends to and for the number of countries involved: Iraq, Syria, Lebanon, Iran, US, plus Turkey Jordan and Saudi in high alert.

Remarkably, there is no visible impact on Iraq's petroleum exports. So far the only impact on the comfortable lifestyles of the west are the gory images circulating through the so called social media.

France 24
UN warns of 'humanitarian tragedy' as ISIS seizes Sinjar
03-08-2014

Sinjar had been controlled by Kurdish troops but they withdrew on Sunday, the second consecutive day of losses for the peshmerga fighters, who also lost the town of Zumar and two nearby oilfields to ISIS jihadists on Saturday.

Sinjar is the historical home of the Yazidis, a Kurdish-speaking minority that adheres to a pre-Islamic faith derived, in part, from Zoroastrianism. They have been targeted by the Sunni militants of ISIS, who believe they are devil worshippers.
If up to this point Sunni and Kurds seemed tolerating each other and avoiding direct clashes, now a new war front is definitely open to the north of Iraq.
Reuters
Kurds, Islamic State clash near Kurdish regional capital
Ahmed Rasheed and Isra' al-Rubei'i, 06-08-2014

Kurdish forces attacked Islamic State fighters near the Kurdish regional capital of Arbil in northern Iraq on Wednesday in a change of tactics supported by the Iraqi central government to try to break the Islamists' momentum.

The attack 40 km (25 miles) southwest of Arbil came after the Sunni militants inflicted a humiliating defeat on the Kurds on Sunday with a rapid advance through three towns, prompting Iraq's prime minister to order his air force for the first time to back the Kurdish forces.

"We have changed our tactics from being defensive to being offensive. Now we are clashing with the Islamic State in Makhmur," said Jabbar Yawar, secretary-general of the ministry in charge of the Kurdish peshmerga fighters.
IS keeps advancing to the south of Baghdad, and although little attention is given by the western media to this war front, it is here that consequences may be direst.
Reuters
Tunneling through triangle of death, Islamic State aims at Baghdad from south
Michael Georgy and Ahmed Rasheed, 04-08-2014

Using secret tunnels built by Saddam Hussein and rough terrain to outfox Iraqi troops, Islamic State insurgents are getting dangerously close to Baghdad with the support of heavily-armed Sunni tribesmen, Iraqi security and intelligence officials said.

The al Qaeda offshoot, which poses the biggest security threat to Iraq since the fall of Saddam in 2003, has made new bold advances in the north, reaching a major dam and seizing a fifth oilfield and three more towns after routing security forces from the Kurdish autonomous region.

But some Iraqi intelligence and security officials are far more alarmed by the Islamic State's less heralded campaign in rural areas just south of the capital, rugged Euphrates valley terrain once known to U.S. forces as the "triangle of death".
Not everyone agreed when I first pointed that IS was not acting as terrorist organisation but much more as a conventional army, capable of opening extensive war fronts. Unfortunately, that is precisely the case, as even the US State Department admits.
Washington Post
Islamic State ‘now controls resources and territory unmatched in history of extremist organizations’
Terrence McCoy, 04-08-2014

It’s just the latest step in the Islamic State’s regional expansion. What was recently a ragtag cadre of former al-Qaeda operatives has now morphed into a transnational, fully militarized and very rich operation said to control more than one-third of Syria’s territory. It makes al-Qaeda look like a bunch of wannabe jihadists.

It’s “worse than al-Qaeda,” Brett McGurk, the State Department’s deputy assistant secretary for Iraq and Iran, told lawmakers last month. It “is no longer simply a terrorist organization. It is now a full-blown army seeking to establish a self-governing state through the Tigris and Euphrates valley in what is now Syria and Iraq.”
IS tried its first incursion into Lebanon this week, holding a city along the border with Syria for several days. Possibly in response, the Hezbollah deployed a small unit to Iraq in support of the Shiite government. It is worth noting that without Hezbollah's timely intervention in Syria last year, most of that country would by now be under control of the IS.
Institute for the Study of War
Echoes of Syria: Hezbollah reemerges in Iraq
01-08-2014

Visibility on Lebanese Hezbollah’s current response to the crisis in Iraq has markedly increased, with reliable sources describing that military advisors are being deployed from Lebanon to assist Iraqi Shi’a militia forces. Nicholas Blanford, for example, has reported that sources close to Hezbollah have revealed that a 250-member advisory unit is being deployed to Iraq. The unit’s primary mission is to advise, train, and coordinate Iraqi Shi’a militias operating under the guidance of Iran’s Islamic Revolutionary Guard Corps (IRGC). The sources furthermore indicated that the advisory unit is also already engaged in conducting intelligence and reconnaissance operations against ISIS forces. This advisory mission echoes Hezbollah’s early primary role in Syria as advisers and trainers of pro-regime forces.
This week was also news the first casualties of Iranian military in Iraq.
Reuters
Insight - Iran's elite Guards fighting in Iraq to push back Islamic State
03-08-2014

In early July, hundreds of mourners gathered for the funeral of Kamal Shirkhani in Lavasan, a small town northeast of the Iranian capital Tehran. The crowd carried the coffin past posters which showed Shirkhani in the green uniform of the elite Islamic Revolutionary Guard Corps and identified him as a colonel.

Shirkhani did not die in a battle inside Iran. He was killed nearly a hundred miles away from the Iranian border in a mortar attack by the militants of the Islamic State “while carrying out his mission to defend” a revered Shiite shrine in the city of Samarra, according to a report on Basij Press, a news site affiliated with the Basij militia which is overseen by the Revolutionary Guards.

Shirkhani’s death deep inside Iraq shows that Iran has committed boots on the ground to defend Iraqi territory.
Throughout the week there where reports of bombings by the US air force on positions held by the Islamic State in the north of Iraq. This was denied at first, but eventually the US President himself confirmed the order of "bombs away".
Associated Press
Obama threatens airstrikes on militants in Iraq
Julie Pace and Robert Burns, 08-08-2014

Declaring that "America is coming to help," President Barack Obama is authorizing U.S. airstrikes if necessary and airdrops of humanitarian aid in northern Iraq to counter advancing Islamic militants and the threat they pose to Americans as well as Iraqi civilians.

The threat to renew U.S. military involvement in Iraq's long sectarian war came in a televised speech by Obama late Thursday. He said American military planes already had carried out airdrops of food and water, at the request of the Iraqi government, to tens of thousands of Iraqi religious minorities atop a mountain surrounded by militants and desperately in need of supplies.

The Yazidis, who follow an ancient religion with ties to Zoroastrianism, fled their homes after the Islamic State group issued an ultimatum to convert to Islam, pay a religious fine, flee their homes or face death.
Jumping now to a war zone closer to home. Libya seems to be hitting the bottom with the complete break down of basic services and order in the capital. Water, electricity, food, roads fuels, medicine, all seem to have disrupted and looting is now part of daily life; the population flees en masse. This country was once one of the most important petroleum suppliers to Europe and one of our largest trade partners in Africa. What was the point of destroying it?
The Daily Beast
Libya: Requiem for a Revolution


Tripoli, meanwhile, has suffered its terrifying descent into chaos. The capital is barely functioning and gripped by panic. Food shops, when they open, are running out of supplies and there are long lines at the bakeries that supply the staple food for Libyan society, although many districts have not seen bread for days. Fuel is almost impossible to be had.

“The electricity blackouts are just awful—they can last from four hours to 22 hours and the heat and fumes from fires is making things worse,” says Nisra, another activist. “People have been complaining of breathing problems but because there is no petrol they can’t get to hospitals, and pharmacies are closed.” Hospitals have put a call out for volunteers—many nurses are Filipinos and they have stopped working after one of them was gang-raped last week. “Medicines are not easy to find and baby milk also is running low,” says Nisra.
The international petroleum market remains apparently impassive, but expectation builds up on short to mid-term fundamentals. An additional uncertainty pointed in the following piece are exchanges rates, indeed another element to take into account for the near future.
About Oil
BofA Merrill Lynch revises up Brent price expectations
Lina Roger, 31-07-2014

Brent crude prices have averaged $109 per barrel so far this year, higher than what Bank of America Merrill Lynch anticipated. In its 2014 Energy Outlook, BofA said that a "strong dollar, sluggish global nominal GDP growth and increasing global crude supplies from North America" would have likely pushed Brent crude oil prices lower to average $105 per barrel in 2014, compared to an average of $109 per barrel in 2013. Yet, Brent crude oil front-month contract rolling prices have averaged $109 per barrel. The experts explained that few factors help explain why Brent has traded more firmly than the expectations. "First, geopolitical concerns and supply disruptions have exceeded our expectations. Second, the trade-weighted dollar has depreciated by about 2.2 percent, annualized against our economists’ projections. And third, U.S. inflation has surprised on the upside," said BofA in a new report.
The tension around the international monetary system has been suddenly hiked by the sanctions enacted on Russia by Europe and the US. The strategy used on Russia is flawed in many ways and the currency element is often forgotten. Fortunately there are still some mainstream media outlets willing to tackle less straightforward issues.
Bloomberg
Russia Sanctions Accelerate Risk to Dollar Dominance
Rachel Evans, 06-08-2014

U.S. and European Union sanctions against Russia threaten to hasten a move away from the dollar that’s been stirring since the global financial crisis.

One place the shift has become evident is Hong Kong, where dollar selling has led the central bank to buy more than $9.5 billion since July 1 to prevent its currency from rallying as the sanctions stoked speculation of an influx of Russian cash. OAO MegaFon, Russia’s second-largest wireless operator, shifted some cash holdings into the city’s dollar. Trading of the Chinese yuan versus the Russian ruble rose to the highest on July 31 since the end of 2010, according to the Moscow Exchange.

While no one’s suggesting the dollar will lose its status as the main currency of business any time soon, its dominance is ebbing. The greenback’s share of global reserves has already shrunk to under 61 percent from more than 72 percent in 2001. The drumbeat has only gotten louder since the financial crisis in 2008, an event that began in the U.S. when subprime-mortgage loans soured, and the largest emerging-market nations including Russia have vowed to conduct more business in their currencies.
The past few days Europe got a taste of what the sanctions on Russia will bring upon us. There is no wining solution down this road.
EurActiv
Finland warns Russia sanctions could spell ‘economic crisis’
06-08-2014

Last week, the EU imposed tough sanctions targeting Russia's banking, oil and defence sectors over Moscow's stance in the Ukraine crisis.

The West accuses Moscow of actively backing pro-Russian rebels in eastern Ukraine and blames them for downing a Malaysian airliner last month. Russia denies the charges.

Russia is Finland's third largest export market, accounting for about 10% of total Finnish sales abroad. Russian tourists also spend roughly €2 billion annually in Finland, a neutral country which shares a long border with Russia.

"This has the potential - and I stress potential - to become economic crisis 2.0," Prime Minister Alexander Stubb told reporters, adding that the indirect impact of the sanctions could be significant for Finland.
With petroleum prices above 100 $/b for so long it is still amazing how some resources remain out of economic reach. The petroleum story in the XXI century will not be an easy tale.
OilPrice.com
More Oil Companies Abandoning Arctic Plans, Letting Leases Expire
Nick Cunningham, 03-08-2014

After years of mishaps and false starts, some oil companies are giving up on drilling in the Arctic.

Many companies have allowed their leases on offshore Arctic acreage to expire, according to an analysis by Oceana that was reviewed by Fuel Fix. Since 2003, the oil industry has allowed the rights to an estimated 584,000 acres in the Beaufort Sea to lapse.

It wasn’t supposed to happen this way. The oil industry was once enormously optimistic about drilling for oil in the Beaufort and Chukchi Seas, off the north coast of Alaska. The U.S. Geological Survey estimated in a 2008 study that offshore Alaska holds almost 30 billion barrels of oil and 221 trillion cubic feet of natural gas.
Negative news on fossil fuels locked in source rocks multiply around the world. All the hype created by the US government and media was just that: hype.
Reuters
China finds shale gas challenging, halves 2020 output target
07-08-2014

China has halved the quantum of shale gas it expects to produce by 2020 after early exploration efforts to unlock the unconventional fuel proved challenging, according to an industry website and a government source.

China, believed to hold the world's largest technically recoverable shale resources, is hoping to replicate the shale boom that has transformed the energy landscape of the United States.

About four years of early evaluations and drilling have so far yielded one large find - Fuling field - in the most prospective gas province of southwest Sichuan, but experts say the Fuling success is hard to repeat due to complex geology and high cost of production.
Here is some weekend reading on these resources, a technical insight sparked by another disappointment with "shale gas".
Bit Tooth Energy
Tech Talk - fracking tight sand and shales
Dave Summers, 03-08-2014

The recent news that Saudi Arabia has not found natural gas to be as available as it had thought from its shale deposits, and is shifting to exploring for gas in their tight sand formations has not caught a lot of attention. But it is worth considering some of the aspects of this – and hence this post.
I wonder if everyone understood the "Canary in the Gold mine" pun two weeks ago. This resource is an ante-chamber to the difficulties coming up throughout this century with the extraction of many key resources. And Steve St. Angelo was back this week with further details.
SRSrocco Report
Gold Mining Industry: Fuel Costs Explode Over The Past Decade
Steve St. Angelo, 04-08-2014

The gold mining industry literally devours energy to produce an ounce of gold. In the past decade, fuel consumption at the top gold miners more than doubled, but the actual energy cost grew at a much higher rate.

The huge increase of diesel consumption at the top 5 gold miners is due to several factors. As ore grades continue to decline, the gold mining companies need to extract more ore to produce the same amount of gold. Thus, the massive haul trucks that transport this ore burn more diesel in the process.

Furthermore, as open-pit mines age, they deepen which forces the haul trucks to travel longer distances at a higher grade. One of the largest haul trucks in the world is the Caterpiller 797F. These haul trucks are massive and can transport 400 metric tons of ore in a single trip.
In the usual positive end note we visit again Portugal (an auto-translation of the article below can be accessed at Google). Renewable energies set a new record at 70% of the electricity mix for the first six months of 2014. This figure comes at a moment when consumption is no longer declining and reports to the least rainy half of the year. Another import point to note is the almost disappearance of thermal gas plants as sources of electricity, now reduced to 2% of the mix. Load balancing duties are now almost exclusively taken by the hydro-electric park. Solar has just crossed 1% of the mix, meaning that with a little push dedicated thermal plants can be entirely phased out, leaving only co-generation units in place. There is a lot more to be said about these numbers, likely justifying a dedicated post at some point. Meanwhile, fossil fuels advocates should definitely adjust their discourse to these data; as Colin Campbell once said: "if you do not deal with reality, reality will deal back with you".
Dinheiro Vivo
Maior parte da eletricidade consumida em Portugal vem da água e do vento
Ana Baptista, 06-08-2014

Até julho, as renováveis pesaram 70% no consumo. Só as eólicas e as barragens abasteceram mais de 60% do consumo elétrico.

Mais de metade da eletricidade consumida no semestre vem das eólicas e das barragens. As energias renováveis continuam a ser principal fonte de eletricidade em Portugal Continental, mesmo agora que já começou o verão e que parou de chover.

As eólicas e as barragens são, precisamente, as energias renováveis que mais pesam na produção elétrica nacional, mais precisamente 60,9%, sendo que as barragens foram responsáveis por 35,6% do consumo e as eólicas por 25,3%.

Segue-se a biomassa, cuja produção representa agora 5,3% do consumo, e depois as pequenas centrais hídricas com um peso de 3,5%. A energia solar, apesar de em crescimento, ainda só representa a 1,1% do consumo.
Have a nice weekend.