www.quicken.com Tuesday, March 4, 2003 02:07 AM ET  Printer-friendly version (From The Wall Street Journal)

Schlumberger Ltd.'s (SLB, news) chief executive said international oil companies aren't likely to invest big dollars to pump up a postwar Iraqi oil industry in the first few years, and he predicted Iraq could only modestly increase production without developing new fields.

Andrew Gould, who last month took over as chairman and CEO of the oil-services company, based in New York, said that any postwar government in Iraq isn't likely to be "sufficiently stable" in the short term to allow the private international oil industry to invest in Iraq. Big oil companies would require " all sorts of guarantees" before investing in the first phase of a postwar Iraq, he said.

Mr. Gould, addressing analysts in New York, also laid out plans for the company to shave its debt by one-third this year through asset sales and tighter control of spending. The announcements came after the 4 p.m. close of regular trading on the New York Stock Exchange.

Iraq can increase its oil production by only 500,000 barrels a day above its peak production in the past two years of about two million barrels a day, Mr. Gould said. That increase assumes that Iraq can upgrade 90% of the country's 3, 000 wells. To take production to an even higher level will require developing new fields, which would take three to five more years, Mr. Gould said.

"The key trigger here is not the U.S. invading Iraq; it is when the United Nations embargo is lifted," he said.

Mr. Gould said Venezuela has lost 10% to 15% of its production permanently because of a lockout by workers at its state oil company. Restoring oil production there will depend on whether the government of President Hugo Chavez extends a moratorium on the firing of trained professionals from Petroleos de Venezuela, the state oil company, and whether he can lure them back to work. Mr. Chavez has fired about a third of

PdVSA's 38,000 employees since the strike began.

World crude-oil prices have risen more than a third in the past three months because of fears of a war with Iraq and because of the supply shortfall caused by the Venezuelan oil strike. Venezuela is operating at only about half of its prestrike level of three million barrels a day.

"They no longer have the technical staff inside PdVSA that can build activity back up," Mr. Gould said.

Mr. Gould said Schlumberger expects to cut its debt below $4 billion this year, from $6.03 billion, through assets sales of $1.4 billion and more capital discipline, including giving regional managers more motivation to share capital across the company.

Schlumberger has struggled amid a poor seismic-testing climate and a depressed market for information technology, and has been criticized for mediocre results from its 2001 acquisition of software firm Sema PLC for $5.2 billion. Mr. Gould acknowledged that the Sema acquisition had reduced the company's financial flexibility. He reiterated the push, announced in December, to reorganize the unit to focus on developing Schlumberger's core oil-field-service business.

Write to Alexei Barrionuevo at Alexei.Barrionuevo@wsj.com.

www.avionnewspaper.com Crystal Schneider Staff Reporter

The name of Embry-Riddle Aeronautical University echoed in the Halls of Harvard University as delegates from the ERAU Model UN team received awards among over 2,500 of the best Political Science, Pre-Law and International Relations majors in the world.

Last weekend, the Model United Nations team led by Dr. Glenn Dorn, participated and excelled in one of the world’s largest, most difficult and prestigious academic competitions, the Model United Nations conferences at Harvard University.

ERAU Students represented the nation of Armenia and were among the strongest delegates in they eyes of judges. Most of ERAU’s delegates held positions within the General Assembly.

Thomas Tanner III and Mark Smalley, debating arms reduction of tactical nuclear weapons in the Disarmament and International Security council, a very difficult committee and controversial issue, were active in drafting several resolutions and critiquing weaker ones.

Denny Henry and Kevin Feather discussed globalization and cultural imperialism in the Social, Humanitarian and Cultural committee. Kevin worked hard to bring consensus on one of the most controversial issues being debated in the world community today. He was a key player in the drafting of a resolution and brought the entire committee to consensus and success in resolving the issue.

Stephanie Phelps, examining state sponsored terrorism in the Special Political and Decolonization committee, showed outstanding leadership, not only in her committee but while working with newer members in their committees as well. Andrew Wittstrom also participated and excelled in this committee.

Judy Nash, in the Legal Committee debated the topic of illicit global financial activity. She was active and contributed significantly in the nuanced language of a resolution in a committee that demands precision.

First time member Brian Smith performed well on the topic of infectious disease within the World Health Organization. With only two weeks to prepare for this conference, it was immediately evident that he would be an asset to the team after only a short time.

In the specialized agencies, Head Delegate Jessica Johnson dealt with the crisis of corruption of Asia in the Economic and Social commission for Asia and the Pacific. Jessica is one of the strongest delegates from ERAU and at only her second conference was delivering excellent speeches and providing leadership and guidance to her committee.

Crystal Schneider aided in bridging the digital divide in the World Summit on the Information Society.

“Dominating her committee,” Dorn said, “Crystal had an all around exceptional performance, creating a strong resolution and exposing the flaws in others. Every speech was strong and well delivered.”

Her winning of an Outstanding Delegate award at Harvard National Model United Nations, after only having participated in one other college level conference was proof that this was one of the strongest delegations the school has ever sent to competition.

“I can’t underestimate the significance of an Embry-Riddle student winning an award in this conference. Two people that won this award when I was in college are now 3rd and 4th level state department officials at the age of 35. The best at this competition are the best in the country and among the finest in the world,” said Dr. Dorn in response to the team winning this award.

Preparation for this event includes months and in some cases even years of an intensive study regime of in-depth research on the policy, current events and history of every nation in the world. The participants go through rigorous training on political debate and parliamentary procedure.

All of this paid off however, as students from Embry-Riddle did as well as, and in many cases outperformed some of the top schools in the field. Among these were schools such as Yale University, West Point Military Academy, University of Pennsylvania, Pace University, Brown University, Dartmouth College, Columbia University, Massachusetts Institute of Technology, the United States Coast Guard Academy, and George Washington University. Schools participating from outside the United States included universities from countries such as China, Venezuela, England, Canada, Mexico and Denmark.

This group of motivated and driven students gave up five days out of busy engineering, pilot and ROTC schedules to compete in the arena of experts in a field opposite to their own. They spent 20 plus hours in committee sessions and countless more during lunch and late nights drafting resolutions and working papers or doing last minute research.

Dr. Dorn said, “Model United Nations is the training ground for future leaders of the world, students who will one day be running nations. Most of these students train for years and this conference is the proving ground for their careers.”

“It is a tribute to the students at Embry-Riddle that pilots and engineers can compete, let alone take home awards,” says Secretary General Jessica Johnson. Many of the delegates reported that almost everyone at the conference was surprised to see them there, let alone doing well at something they spend their college careers training for.

The attendance and performance would not have been possible but for the support and efforts of many. The ERAU Model U.N. thanks Chancellor Price, the Campus Council, and the Annual Fund for their financial support, which made it possible for ERAUMUN to represent Embry-Riddle at such a prestigious and internationally recognized event.

The team would also like to extend their appreciation for the efforts of Suzanne Spurgeon, Roderick Clark, and Dr. Glenn Dorn, without which the success of the delegation would not have been possible.

Finally, the hard work and countless hours of preparation put in by the delegates must be recognized.

“They truly performed above and beyond all hopes or expectations considering illness and injury.” Says Stephanie Phelps who single handedly organized and coordinated almost every stage of this trip.

In the words of the Under-Secretary General, Judy Nash: “We went, we learned a lot, and we kicked Yale’s butt (at least in Crystal’s committee).” And let no one forget, as Brian Smith pointed out: “We’re engineers!”

© 2002 The Avion Terms and Conditions

seattlepi.nwsource.com Tuesday, March 4, 2003 By PAUL NYHAN SEATTLE POST-INTELLIGENCER REPORTER

Gasoline prices continued to rise at pumps around Washington state, as the average price of a gallon of regular unleaded hit record levels in Olympia, Spokane, Tacoma, Seattle and other regions in recent days.

In the Seattle area, drivers paid, on average, $18.39 to fill 10-gallon gas tanks with regular unleaded gas on Friday, while they paid $12.14 a year ago, according to the most recent data from AAA.

Drivers have watched gas prices rise steadily over the past month. Local gas station owner Ric Kastner said the price he paid for a gallon of gas for his pumps in Magnolia jumped 41 cents in 24 days.    Phil H. Webber / P-I   Ric Kastner, who owns Ric's Automotive & Texaco Inc. in Magnolia, fills a gas tank at his station; his premium was selling for $2.15 9/10 a gallon yesterday. "I have never seen them (gas prices) go up this high this fast," he said.

"I have never seen them go up this high this fast," said Kastner, who owns Ric's Automotive & Texaco Inc. in Magnolia and has worked in the oil business for the past 34 years.

Industry officials blame some of the price run-up on tensions over an impending war with Iraq and the labor dispute in Venezuela, which is settled but continues to hamper supply.

"You do have speculation about the war with Iraq that does increase concern about future supply," Exxon Mobil Corp. spokeswoman Carolin Keith said.

But Washington state also lacks the level of competition found in other regions of the country, according to Tim Hamilton, executive director of the Automotive United Trades Association in Olympia.

"At the retail (level), there is a limited number of companies marketing it," Hamilton said. "The four big guys control a major amount of the retail market: BP Plc.'s Arco, ChevronTexaco Corp., Shell Oil Co. and ConocoPhillips, which owns the 76 brand."

Kastner said retailers are not profiting from the higher prices.

"If I was making all the money, I'd be smiling," Kastner said. "But the dealers aren't getting rich."

Keith said Exxon Mobil prices reflect the global market.

"It isn't an issue of gouging; it's an issue of market pressure," Keith said.

The reasons and level of profits behind the rise may be unclear, but the increases continued last week. After hitting a record level in Seattle, Bellevue and Everett on Wednesday, $1.77 a gallon, prices kept rising to $1.84 by the end of Friday, according to AAA.

In Olympia, the price for a gallon of regular unleaded also rose to $1.74, up sharply from $1.35 a month ago and $1.14 a year ago, the automobile association reported.

In Spokane, regular gas went for $1.72 a gallon, another record.

Nationwide, the price of gasoline also jumped. A gallon of regular unleaded gas cost, on average, $1.69 across the nation, a 21-month high, the Energy Department reported yesterday.

Oil-industry executives say the price of crude oil, which rose 60 percent over the past year, is the main culprit behind the increases.

Refiners also have been slow to begin raising production of gasoline, which normally occurs at this time of year, because they've focused on making heating oil during the cold winter in the Northeast.

Texaco station owner Kastner offered a little hope for beleaguered drivers. "This summer, I wouldn't be surprised if they (prices) dropped," he said.

This report includes information from Bloomberg News.

www.usatoday.com Posted 3/3/2003 11:16 PM By Barbara Hagenbaugh, USA TODAY

WASHINGTON — As gasoline prices soar, service station owners say they are seeing an increase in the number of drivers who are skipping out on the bill.

Last week, a Shell gas station clerk in New Port Richey, Fla., was injured after he grabbed onto a car door to stop a motorist who was running out on a $16 bill. Karam Zaki, 34, was dragged 450 feet while being kicked by the driver before swinging off the car. The driver has not been caught. (Related story: Gas goes above $2 a gallon in Calif.)

Case Marshall, owner of 16 Pit Stop Convenience Stores in upstate New York, says he has seen a rise in "drive offs," but the increase has been nowhere near as steep as it was in 2001, when gas prices were also elevated. That's perhaps in part because of steps he's taken to thwart thieves, including requiring cashiers to turn on the pump every time a new driver shows up. Recent numbers are not available, but pump-and-runs cost owners more than $1,000 per station in 2001, according to the National Association of Convenience Stores — costing the industry more than $100 million.

Station owners say they always see an increase in gas theft when prices are high. While some drivers may be squeezed so tight they can't afford the higher gas costs, owners say others, thinking gas sellers are jacking up prices unfairly, may be taking it out on them. Some elected officials and AAA have questioned if there is price gouging going on, a claim station owners angrily reject.

"Everybody wants to blame us," says Bill Douglass, who owns 10 Lone Star convenience stores in Texas.

"There's a perception out there that when the price of gasoline goes up, we're just making that much more money," says Jim Tudor, president of the Georgia Association of Convenience Stores. "That's nowhere near the truth."

Retailers say they have not raised prices as quickly as their gas costs have increased. Prices have gained over the past several months as the cost of crude oil, which accounts for half of the cost of gasoline, has skyrocketed because of worries about a war with Iraq, a strike in oil-producer Venezuela and low supplies. Station owners say after paying for gas, taxes, staff and other costs, they are hardly making money.

To deter theft, some station owners require customers to pay before pumping, and others have installed security cameras. Some states and localities have enacted laws in recent years to increase fines for driving away without paying or allow law enforcement officials to take away drivers' licenses.

www.startribune.com Bob von Sternberg, Star Tribune Published Mar. 4, 2003 OIL04    As the United States draws ever closer to another war against Iraq, the role of oil in that struggle has come under increased scrutiny.

While antiwar activists boil their argument down to a chant of "no war for oil," the more hawkish advocates of war have gone so far as to say Iraq's vast oil wealth could be used to pay the costs of occupying the country.

Depending on the course of the fighting, its effect on U.S. consumers and the world's economy could be anything from trifling to catastrophic.

Start with the immediate economic effects when the bombs start dropping: If the experience of the 1991 Gulf War and the assessment of most oil industry analysts are any guide, the fallout should be relatively modest.

Iraq's invasion of Kuwait and the subsequent war spawned widespread fear that the world would plunge into an energy crisis. It never happened.

Demonstration of oil well firefighting techniques

Sue Ogrocki Associated Press

Immediately after Iraqi troops stormed into Kuwait, the price of oil shot up to about $40 a barrel. As soon as it was obvious that the war would be short and decisive, the price fell back below $20 a barrel. Other oil-producing nations had stepped into the breach.

This time around, jitters about war and the recent political chaos in oil-rich Venezuela have kept oil prices relatively high. Last week, prices reached their highest levels since the '91 Gulf War, briefly approaching $40 a barrel.

'Short-lived'

Although Iraq's oil reserves are second only to Saudi Arabia's, the effect of a war on the world's oil markets is likely to be even less than the the first Gulf War. Pumping only about 2 million barrels a day, its production represents a mere 2 percent of worldwide production.

"If the issue were simply the likely loss of Iraqi exports, most experts would agree that the market impact of military action would be manageable and short-lived," concluded a recent report by the Petroleum Industry Research Foundation in New York.

However, the report warned: "It should be kept in mind that while the U.S. may decide the timing of military action, the consequences for the region, and the ultimate impact on oil, remain unknown."

The impact depends on how quickly a war ends and whether Saddam Hussein's forces torch their oil fields as they did Kuwait's 12 years ago.

On Feb. 7, Iraq's ambassador to Russia, Abbas Khalaf, said his countrymen "will not blow up the oil fields in the event of strikes on its territory." Khalaf also told the ITAR-TASS news agency: "Oil is our national wealth."

Even so, Pentagon planners have spent long hours on a strategy for protecting the oil fields. The options reportedly range from dispatching special operations forces into Iraq's oil fields during the early fighting to using electronic jamming equipment to hinder a coordinated destruction of wells.

The Center for Strategic and International Studies recently analyzed likely scenarios.

If war is avoided, oil prices will quickly collapse worldwide, reaching a low of $16 a barrel late next year, the center predicted. A war that ends within weeks, with few casualties and no damage to Iraq's oil industry would cause a brief spike in prices into the $30 range, tailing off to about $20 a barrel at the end of 2004. In the worst case -- a protracted war in which weapons of mass destruction are employed -- the price would skyrocket to $80 shortly after the fighting begins, remaining above $60 throughout 2003 and falling only to $40 a barrel in 2004.

Such price increases could ripple catastrophically through the world's economy. The International Monetary Fund has a rule of thumb that for each $5-per-barrel annual increase in the price of oil, the world's gross domestic product drops 0.25 percent. A sustained oil price of $60 would knock a full 1.5 percent off the world GDP.

Unlike in 1990, when Iraq's invasion of Kuwait caught the oil industry by surprise, the Bush administration has given the industry ample time to prepare. The International Energy Agency has announced that its 26 member countries are holding 4 billion barrels of oil in reserve, equal to 114 days' worth of imports by the United States and other importing countries.

Agency officials say this war will not be a repeat of 1990, when months passed before it released stocks. This time, they have promised to act within hours of the start of fighting.

The United States has its own ace in the hole -- oil stored in the Strategic Petroleum Reserve, located in the Mississippi Gulf Coast's underground salt domes. Oil has been released from the reserve only once, when the first President Bush ordered the release the day the bombing started in 1991. His son has pledged to do the same.

The reserve holds about 550 million barrels, enough to supply the entire U.S. market for less than 29 days.

Perhaps the most vexing question about Iraq's oil is how it will be controlled once the war is over.

A U.S. task force is conferring with energy experts, industry executives and Iraqi opposition leaders on how to revive and expand Iraq's multibillion-dollar oil empire once Saddam is toppled. Bush administration officials consider revenue from oil exports essential to rebuilding the country once the fighting stops.

Those officials also are loath to say much publicly about Iraq's oil, lest they stoke criticism that a war with Saddam is as much about oil as it is about terrorism.

After reports surfaced in January that some administration officials were pushing for de facto U.S. control of Iraq's oil industry, Secretary of State Colin Powell was quick to quash the notion.

"The oil of Iraq belongs to the Iraqi people," Powell said during a Jan. 21 press conference. "It will not be exploited for the United States' own purpose."

Edward Djerejian, director of the James A. Baker Institute for Public Policy at Rice University, co-authored a recent report with the Council on Foreign Relations that analyzed a post-Saddam Iraq. The report urged that the Iraqis be allowed to retain control of their oil.

"One of the most important issues to address is the widely held view that the campaign against Iraq is driven by an American wish to 'steal' or at least control Iraqi oil," the report concluded. "U.S. statements and behavior must refute this."

Massive investment

Robert Ebel, one of the authors of the report by the Center for Strategic and International Studies, said it's impossible to predict Iraq's future oil production because "we don't know what kind of Iraq we're going to have in the morning after."

It is certain, though, that "there will be a massive investment program to get the Iraqi oil industry first back on its feet and then to top it off with expansion," he said.

The ultimate cost could reach $40 billion, according to Djerejian's report. Energy service companies such as Halliburton and Bechtel, which oversaw the repair of Kuwait's oil fields, could earn billions of dollars in deals to upgrade wells, pipes, pumping stations and export terminals in Iraq.

And the world's oil giants -- such as Exxon Mobil Corp., ChevronTexaco and Russia's Lukoil -- are looking for a chance to negotiate lucrative development deals with Iraq.

The fact that many of these companies have close ties to top Bush administration officials -- including Vice President Dick Cheney, who once ran Halliburton, and the president himself -- has fueled speculation among some critics that an attack on Iraq is mostly about oil. The administration strongly denies any such intent.

Also unanswered is how a cash-starved Iraq, under pressure to pump as much oil as possible, will deal with OPEC's strategy of limiting production to keep prices steady. The Saudis and other members of the Organization of Petroleum Exporting Countries (OPEC) are unlikely to allow Iraq to overproduce, which would drive down world oil prices.

The Middle East Economic Survey, a weekly oil newsletter published in Cyprus, recently reported that OPEC members are considering the prospect of a U.S. occupation of Iraq that would lead to the United States, in effect, sitting in as a temporary member of the cartel.

"If it is clearly in Iraq's interest to remain in OPEC, then the intriguing prospect must arise of the U.S. representing it during the occupation period," the newsletter said.

The Associated Press contributed to this report.-- Bob von Sternberg is at vonste@startribune.com.