U.S. House Republican leaders proposed a $260 billion transportation spending bill Tuesday, but its prospects are slim because of controversy over provisions to allow heavier trucks and to pay for new projects with expanded oil and gas production. The bill is important for all 50 states, including Louisiana, because it sets spending parameters for transportation financing critical to repairing and upgrading roadways. The bill also is one of the federal government’s biggest job-generators.

But unlike a competing Senate version, which has bipartisan support and doesn’t contain the controversial proposals to expand drilling and allow heavier trucks, the House bill was labeled a nonstarter. Transportation Secretary Ray LaHood, a former GOP House member, said he doubts the House and Senate will agree on a transportation bill this year.

Neither bill includes earmarks, the financing directed by lawmakers for pet projects back home. Democrats and Republicans, bowing to public pressure, agreed to drop earmarks, though that makes it harder for lawmakers to guarantee money for local projects. The last highway bill has about 6,300 earmarks.

Already one Louisiana member on the House Infrastructure and Transportation Committee has voiced opposition to the bill introduced by committee chairman John Mica, R-Fla.

Rep. Jeff Landry, R-New Iberia, said through a spokesman that he agrees with the Louisiana Sheriff’s Association and the Louisiana State Troopers Association that heavier and longer trucks authorized by the bill would pose safety problems and would damage the state’s highways and bridges.

Rep. Cedric Richmond, D-New Orleans, expressed opposition on similar grounds. Rep. Steve Scalise, R-Jefferson, was noncommittal.

Proponents, including the trucking industry and groups dependent on shipping their products by truck, said bigger trucks mean they can save fuel and lower costs to consumers without sacrificing safety.

Also controversial are House Republican plans to use revenue from expanded drilling, which they plan to authorize as part of the measure, to pay for the transportation costs. While the House bill would authorize $260 billion during the next 4½ years, the Senate version would set aside $120 billion during the next two years, without any mention of expanding oil and gas development.

House Speaker John Boehner, R-Ohio, plans to add a provision allowing Congress to approve the Keystone XL pipeline over the objections of President Barack Obama. That’s likely to face heavy opposition in the Democratic-controlled Senate and a veto threat from the White House.

Also likely to generate controversy is the House bill’s provision to streamline environmental requirements for major transportation projects and another cutting Amtrak financing by 25 percent.

The House bill also contains a provision that would encourage states to turn to private firms to build extra lanes on congested highways and bridges. The provision would let states allow the private firms to charge tolls on the new lanes, which would operate as “express lanes” for motorists willing to pay the cost.

Asked about whether the state would turn to private companies to widen roads, Jodi Conachen, spokeswoman for the Louisiana Department of Transportation and Development, said “it would be premature to comment” because the proposals are still working through the legislative process.

The Port of New Orleans, which depends heavily on shipping, also declined to take a position.

Mica, the transportation committee chairman, said the House bill represents the “largest transportation reform bill since the creation of the Interstate Highway System in 1956.

But environmentalists said it would reduce necessary environmental oversight and force an unwise expansion in domestic drilling.

“Instead of going the bipartisan route taken by the Senate, House Republican leaders have loaded the bill with environmental protection rollbacks, extreme measures that mandate oil drilling just about everywhere, and a permit for the Keystone XL tar sands pipeline,” said Frances Beinecke, president of the Natural Resources Defense Council.

original article

Jan. 5 (Bloomberg) — The latest warning by Iran, that a U.S. aircraft carrier that recently transited through the Strait of Hormuz should not do so again, is a sign to the West that should be well-observed. It tells us the regime in Tehran is ready for a fight.

Tensions between Iran and the U.S. are so high, a conflagration could be tripped off without either country intending it. This latest spiral of hostility began after the U.S. and its European allies responded to the International Atomic Energy Agency’s report on Iran’s nuclear activities by imposing and threatening additional, tougher sanctions. New U.S. measures may drastically cut Iran’s oil revenue.

That, in turn, may threaten the Iranian regime’s hold on power. Predictably, then, the ruling clerics are responding with shows of strength to boost solidarity at home. And they can be counted on to accelerate Iran’s nuclear program, which they see as a deterrent to foreign intervention.

To escape this self-defeating outcome, the Western powers should imagine how the situation looks from Tehran.

In recent months, Iranian protesters have brazenly attacked the U.K. Embassy in Tehran. Iran has claimed to have downed a U.S. drone, put on 10-day war games simulating attacks on U.S. ships, and threatened to push oil prices to $250 a barrel and to close the Strait of Hormuz, through which about 20 percent of all oil trade passes.

Changed Stance

This defiance marks a change. Until recently, Iran had absorbed economic pressure from abroad. It had remained silent in the face of covert operations aimed at slowing the progress of its nuclear program, brushing off the destructive Stuxnet computer worm, apparently a joint U.S.-Israeli project. But the government has been embarrassed and unnerved by multiple assassinations of its scientists and by suspicious explosions at its military facilities. One blast killed the general charged with developing Iran’s missile program. The attacks have shaken the country’s security forces.

The ruling clerics are also worried about the impact of economic sanctions, which have greatly reduced Iran’s access to global financial markets, created shortages of imported items, and increased inflation and unemployment. The rial has fallen to its lowest point against the dollar, and capital is fleeing the country at an alarming rate. The government has been forced to scrap numerous infrastructure projects, especially in the oil- and-gas sector.

These hardships have caused popular discontent. The next set of sanctions may bring street protests. Iran’s rulers fear a repeat of the demonstrations of 2009. They now see the U.S. policy on Iran — of toughening sanctions and also, at the United Nations, addressing Iran’s human-rights record and support for terrorism — as one aimed at regime change.

That makes attaining nuclear weapons of critical importance to the clerics. Without such weapons, Iran could face the Libya scenario: economic pressure causing political unrest that invites intervention by foreign powers that feel safe enough to interfere in the affairs of a non-nuclear-armed state. The more sanctions threaten Iran’s internal stability, the more likely the ruling regime will be to pursue nuclear deterrence and to confront the West to win the time Iran needs to reach that goal.

It wasn’t preordained that Iran would opt for battle. For much of the past year, its leaders have debated how best to deal with Western pressure. The alleged plot to assassinate the Saudi ambassador in Washington, which U.S. officials uncovered in October and blamed on Iran, suggests a faction has been making the case for direct confrontation with the West. But President Mahmoud Ahmadinejad had hoped the September release of two Americans, hikers arrested by Iranian authorities and charged as spies, would shield Iran from further pressure and even create a diplomatic opening with the U.S. on the eve of his trip to the UN. Instead, Ahmadinejad went home empty-handed.

‘Serious Concerns’ Articulated

Subsequent events seem to have settled the policy debate in Tehran. They included the accusations by the U.S. in the Washington plot; a UN report critical of Iran’s record on human rights; the IAEA report articulating “serious concerns” about a possible Iranian nuclear-weapons program; and the ensuing fresh sanctions.

By a remarkable unanimous vote, the U.S. Senate passed a bill imposing sanctions on foreign financial institutions engaged in oil-related transactions with Iran’s central bank, which would greatly hinder that country’s ability to sell its oil. Reluctant to go that far, President Barack Obama opposed the bill and instead signed a slightly amended measure that gave the U.S. administration six months to enforce the sanctions if it judges they could cause oil prices to soar. Iran has interpreted sanctions that hurt its oil exports, which account for about half of government revenue, as acts of war. If there are new, mysterious attacks on Iranian scientists or military facilities, the climate for conflict will be that much hotter.

Obama administration officials think Iran is weak and isolated. They focus on the country’s shambolic economy, its faltering relations with Europe, and the effect the Arab Spring has had in turning public opinion in the Middle East against Iran.

But Iran’s rulers have a different outlook. Here’s what they see: The U.S. and Europe are economically weak and extremely vulnerable to high oil prices. China and Russia have broken with the U.S. and Europe over Iran. The U.S. is hastily leaving Iraq and abandoning the war in Afghanistan. U.S. relations with Pakistan are unraveling.

Iran’s rulers believe the new Middle East is a greater strategic challenge to the U.S. than to Iran. For the U.S., the region will be far less pliable under rising Islamists than it was under secular dictators. As those Islamists take control of governments from Morocco to Egypt, new opportunities arise for Tehran to forge diplomatic and economic ties.

Consequently, the Iranian regime thinks it can counter international pressure on its nuclear activities long enough to get to a point of no return on a weapons program.

Rather than discourage this aggressive Iranian position, U.S. policy is encouraging it, making a dangerous military confrontation more likely. There are no easy options for dealing with Iran, but not persisting in a failing strategy is a good place to start.

Original Article

-

By Andrew Restuccia – 12/27/11 02:59 PM ET

Three House Democrats on Tuesday called on Energy Secretary Steven Chu to increase the size of a Northeast oil reserve amid concerns that recent refinery closures will make it more expensive for people to heat their homes during the winter months.

Reps. Edward Markey (D-Mass.), Robert Brady (D-Pa.), and Allyson Schwartz (D-Pa.) pressed Chu to increase the size of the Northeast Home Heating Oil Reserve to 2 million barrels amid plans by ConocoPhillips and Sunoco to idle three Pennsylvania oil refineries.

“Given the already high prices consumers are facing this winter, DOE must ensure that consumers are safeguarded from spot shortages and higher prices resulting from these oil companies reducing refining capacity,” the lawmakers said in a letter to Chu.

The Democrats pointed to a recently released Energy Information Administration report that raised concerns about potential price volatility as a result of the companies’ decisions to idle the oil refineries. The three Pennsylvania refineries make up about half of the Northeast’s refining capacity.

Meanwhile, in a separate letter, Markey and Brady pressed the Federal Trade Commission to examine the companies’ plans to idle the refineries.

“We are extremely concerned that the decisions by these two oil companies to remove such a substantial amount of the Northeast’s refining capacity could adversely impact consumers and we request that the FTC examine the enclosed EIA analysis as part of its ongoing review of these oil company actions, consistent with the FTC’s responsibilities to protect consumers from anticompetitive or other improper practices,” the lawmakers said in the letter to FTC Chairman Jon Leibowitz.

The letter comes several days after EIA released an analysis of the effects of the Pennsylvania refinery closures. The report says the idled refineries could create a series of logistical problems that could increase “price volatility.”

In order to protect against potential price spikes, Markey, the top Democrat on the House Natural Resources Committee, and the other lawmakers called on Chu to fill the Northeast Home Heating Oil Reserve to full capacity.

The reserve, which was established under a 2000 energy law to make up for supply losses, now holds 1 million barrels of oil. It originally was designed to hold 2 million barrels.

Original Article

-

New York (Platts)–19Dec2011/443 pm EST/2143 GMT

Weekly oil data from the US Energy Information Administration and the American Petroleum Institute should show a 2.25 million-barrel draw in US commercial crude inventories for the week ending December 16, analysts polled by Platts said Monday.

API is scheduled to release its weekly data at 4:30 p.m. EST (2130 GMT) Tuesday. EIA’s weekly oil statistics will be released at 10:30 a.m. EST (1530 GMT) Wednesday.

Refiners should continue to keep crude runs high, while imports are expected to drop, analysts said, resulting in a stock decline. Analysts expect refinery operations to climb 0.30 percentage points to 85.4% of capacity, based on last week’s EIA data.

“This week’s [EIA] report has traditionally given us declines in crude oil imports as refineries slow their end-of-year imports,” said Cameron Hanover analysts in a report. “Typically, though, they increase refinery runs and utilization rates as the year winds down, but they prefer to pull barrels from storage.”

The five-year average of the EIA data for the week shows US crude stocks dropping roughly 5.5 million barrels, and imports falling 240,000 b/d. The five-year average shows stocks rising in the first quarter as refinery runs decline.

The data may show a drop in US Gulf Coast crude imports as fog delayed vessel boardings last week in the Houston Ship Channel. The channel serves a total of eight refineries, with a total capacity of 2.23 million b/d, according to Platts and EIA data.

Analysts polled by Platts were looking for a distillate stock draw of 600,000 barrels, with demand outpacing production likely remaining near record high levels.

Still, demand has eased in recent weeks. Demand on a four-week moving average the week ending December 9 was 3.795 million b/d, down from nearly 4.3 million b/d the week ending November 11, the EIA data shows.

US distillate production was down just 56,000 b/d at 4.976 million b/d the week ending December 9, despite a drop in refinery operations. “In the week ahead, we think inventories could slip by 0.5-1.5 [million barrels] after rising the prior three weeks, as last week’s 2.6% drop in refinery operating rate should translate into reduced production,” said Citi Futures analyst Tim Evans in a report. “A minor decline is relatively normal at this time of year, with inventories falling 0.6 [million barrels] in the same week of 2010 and by 0.3 [million barrels] on average over the past five years.”

Analysts were expecting a 1.75 million-barrel build in US gasoline stocks, as is the historical norm this time of year. The five-year average of the EIA data for the week shows gasoline stocks up roughly 1.8 million barrels.

Gasoline imports, while still below the five-year average, have recovered from the lows seen in September and October. Imports at 776,000 b/d the week ending December 9 were up from 418,000 b/d October 7.

Recent activity in the clean tanker market suggests steady imports. Spot rates on the Northwest Europe to US Atlantic Coast clean tanker route have risen to $29.50/mt Monday from $20.79/mt on December 1, according to Platts data. Although gasoline traders said that the dramatic increase in freight rates could soon close the arbitrage to the US.

Original Article

-

By Timothy Gardner

WASHINGTON | Wed Dec 14, 2011 5:55pm EST

(Reuters) – The United States is building ties with a range of oil producing countries in an effort to ensure a steady supply of crude to global markets as the West ratchets up the threat of increased sanctions against Iranian exports.

According to a State Department official, the groundwork is being laid with exporters including Ghana, Angola, and Iraq, where the oil industry is recovering from war and years of neglect, to boost global spare oil capacity in case of outages that can lead to price spikes that threaten the fragile economy.

As Iran, the world’s fifth biggest oil exporter, faces calls for fresh sanctions based on concerns it is developing a nuclear bomb, the United States is working with countries beyond its old ally Saudi Arabia to ensure spare capacity in global oil markets.

“It’s no longer just going to one or two places and saying, ‘Hey can you pump an additional million barrels per day and we will all be fine,’ it’s become a much more complicated market to be able to work with,” Carlos Pascual, the State Department’s special envoy and coordinator for international affairs told a meeting at the Council on Foreign Relations on Tuesday night.

Pascual was in charge of creating the State Department’s new Bureau of Energy Resources, which takes the lead on issues from market stabilization to lowering environmental risks of energy production.

Tighter sanctions on Iran could result in its output falling by about a quarter to below 3 million bpd by 2016, the International Energy Agency, the West’s energy watchdog, said this week.

Some groups in Washington also hope to make U.S. sanctions on Iran smarter by pushing China and other countries in the East to buy more of Iran’s oil. The idea is China has a better bargaining position than Europe because it’s state oil companies buy crude as a monolithic block and can force Iran to sell its crude for a lower price and deprive it of billions of dollars in petroleum revenues.

Saudi Arabia remains the swing producer of the Organization of the Petroleum Exporting Countries, a major factor in the world’s spare capacity cushion, now estimated about 2.5 million bpd to 5 million bpd.

FABRIC OF A STABLE MARKET

But as the kingdom’s domestic demand for crude rises and as the world’s thirst for oil grows to nearly 90 million bpd, new sources of oil are also coming into focus for Washington.

Angola’s oil production, which is currently about 1.7 million bpd is expected to rise to nearly 2 million bpd by 2013 and keep rising.

Iraq’s output has risen about 500,000 bpd this year to about 2.95 million bpd, the highest level in two decades, and could easily rise by the same amount next year, Pascual said.

Ghana joined the club of oil producers in late 2010 when the offshore Jubilee field operated by Tullow Oil (TLW.L) started up producing light sweet crude. The company is hoping to soon hit a target of 120,000 barrels per day from the field, while Ghana’s total oil reserves are estimated to be at least 1.25 billion barrels.

Production in offshore East Africa could also take off in coming years, Pascual added.

“What seemed in the past to people as maybe not that significant, 200,000 barrels here and 400,000 barrels there, is part of what actually makes up that whole texture, that whole fabric, of what can become a stable market,” Pascual said.

Rising oil output in the Western Hemisphere also has big potential to add to the global supply cushion. Offshore drilling in Brazil could make it Latin America’s biggest oil producer in coming years, while Canadian and U.S. oil production is also rising from unconventional sources such as shale oil and oil sands.

“The problem is those new supplies are not elastic,” Pascual said. “You can’t turn them on and off tomorrow, and so if you have an immediate problem or spike that takes those supplies off the market, then the speculation starts, then the price spikes start.”

(Reporting By Timothy Gardner; Editing by Alden Bentley)

Original Article

-

By Moming Zhou

Dec. 13 (Bloomberg) — Crude oil inventories rose 462,000 barrels to 334.6 million last week, the American Petroleum Institute said.

Distillate fuel inventories increased 1.24 million barrels to 142.4 million, the API’s weekly report showed. Gasoline stockpiles slipped 12,000 barrels to 215.3 million.

Inventories at Cushing, Oklahoma, the delivery point for futures traded on the New York Mercantile Exchange, gained 94,000 barrels to 31.2 million.

The Energy Department is scheduled to release its inventory report tomorrow at 10:30 a.m. in Washington.

The government report may show stockpiles of crude oil fell 2.5 million barrels last week, according to the median of 12 responses in a Bloomberg News survey. Gasoline inventories probably advanced 1.2 million barrels, and distillate inventories probably rose 1 million barrels, the survey showed.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Crude oil for January delivery rose $2.27 to $100.04 a barrel at 4:31 p.m. in electronic trading on the New York Mercantile Exchange. The contract, which settled at $100.14, traded at $99.96 before the report was released at 4:30 p.m.

–With assistance from Margot Habiby in Dallas. Editors: Margot Habiby, Charlotte Porter

Original Article

-

By Richard Stubbe

Crude oil inventories declined 5.04 million barrels to 334.1 million last week, the American Petroleum Institute said.

Distillate fuel inventories rose 1.68 million barrels to 141.1 million, the API’s weekly report showed. Gasoline stockpiles rose 5.97 million barrels to 215.4 million.

Inventories at Cushing, Oklahoma, the delivery point for futures traded on the New York Mercantile Exchange, dropped 1.22 million barrels to 31.1 million.

The Energy Department is scheduled to release its inventory report tomorrow at 10:30 a.m. in Washington.

The government report may show stockpiles of crude oil fell 1.25 million barrels last week, according to the median of 12 responses in a Bloomberg News survey. Gasoline inventories probably rose 875,000 barrels, the survey showed. Distillates were expected to increase 1.15 million.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Crude oil for January delivery rose 14 cents to $101.13 a barrel at 4:31 p.m. in electronic trading on the New York Mercantile Exchange. The contract, which settled at $101.28, traded at $101.07 before the report was released at 4:30 p.m.

Original Article

-

Big Oil is redrawing the energy map.

For decades, its main stomping grounds were in the developing world—exotic locales like the Persian Gulf and the desert sands of North Africa, the Niger Delta and the Caspian Sea. But in recent years, that geographical focus has undergone a radical change. Western energy giants are increasingly hunting for supplies in rich, developed countries—a shift that could have profound implications for the industry, global politics and consumers.

Driving the change is the boom in unconventionals—the tough kinds of hydrocarbons like shale gas and oil sands that were once considered too difficult and expensive to extract and are now being exploited on an unprecedented scale from Australia to Canada.

The U.S. is at the forefront of the unconventionals revolution. By 2020, shale sources will make up about a third of total U.S. oil and gas production, according to PFC Energy, a Washington-based consultancy. By that time, the U.S. will be the top global oil and gas producer, surpassing Russia and Saudi Arabia, PFC predicts.

That could have far-reaching ramifications for the politics of oil, potentially shifting power away from the Organization of Petroleum Exporting Countries toward the Western hemisphere. With more crude being produced in North America, there’s less likelihood of Middle Eastern politics causing supply shocks that drive up gasoline prices. Consumers could also benefit from lower electricity prices, as power plants switch from coal to cheap and plentiful natural gas.

And the change is reshaping the oil companies themselves, as they reallocate their vast resources to new areas and new kinds of fuel. Working in the rich world—with its more predictable taxes and investor-friendly policies—removes some of the risks about the big oil companies that worry investors, making them less vulnerable to the resource nationalism of petrostates like Russia and Venezuela.

“A company like Exxon Mobil can eliminate the technological risk” of developing unconventionals, says Amy Myers Jaffe, senior energy adviser at Rice University’s Baker Institute. “But it can’t eliminate the risk of a Vladimir Putin or a Hugo Chavez.”

This new way of looking at risk is at the heart of the transformation. International oil companies traditionally face a choice: They can either invest in oil that is easy to produce but located in politically volatile countries. Or they can seek opportunities in stable countries where the oil is hard to extract, requiring complex and expensive production techniques.

Now, in a sense, the choice has been made for them. Big onshore fields in the world’s most prolific hydrocarbon provinces are increasingly the preserve of national oil companies, state-owned behemoths like Saudi Aramco and Russia’s OAO Rosneft and OAO Gazprom. For foreign majors like Royal Dutch Shell PLC and BP PLC, their former heartlands in the Gulf sands are now largely off-limits.

Shut out of the Middle East, they have responded with a huge push into new areas, both geographic and technological. Over the past few decades, they have built vast plants to produce liquefied natural gas, or LNG. They have drilled for oil in ever-deeper waters, ever farther offshore. They have worked out how to squeeze oil from the tar sands of Alberta. And they have deployed technologies like hydraulic fracturing, or fracking, and horizontal drilling to produce gas from shale rock.

Wood Mackenzie, an oil consultancy in Edinburgh, says that more than half of the international oil companies’ long-term capital investments are now going into these four “resource themes”—a huge shift, considering how marginal the companies once considered them.

There are also drawbacks to the new focus on nontraditional kinds of hydrocarbons. Environmentalists strongly oppose shale-gas extraction due to fears that fracking may contaminate water supplies, the oil-sands industry because it is energy-intensive and dirty, and deep-water drilling because of the risk of oil spills like last year’s Gulf of Mexico disaster.

There are financial considerations, too. While conventional assets are relatively easy to develop and historically have offered good returns, projects in some more technically difficult sectors—like deep-water and LNG—typically take longer to bring on-stream, and are higher cost, meaning returns are lower.

But there is an upside for the majors. “The silver lining is the shape of the profile of these projects, which is different than conventional ones,” says Simon Flowers, head of corporate analysis at Wood Mackenzie. LNG ventures, for example, can deliver contract levels of gas at a steady rate over 20 years. “So the returns may be lower, but overall you have a more dependable cash-flow stream,” he says.

By pursuing these nontraditional fuels, the oil companies are committing themselves ever more deeply to the wealthy nations of the Organization for Economic Cooperation and Development. Wood Mackenzie says $1.7 trillion of future value for all the world’s oil companies—52% of the total—is in North America, Europe and Australia. The consultancy has identified a “significant westward shift” in oil-industry investment, away from traditional areas like North Africa and the Middle East “towards the Brazilian offshore, deepwater oil in the Gulf of Mexico and West Africa and unconventional oil and gas in North America.” And then there’s Australia, far out east, “which is in the early stages of a spectacular growth phase.”

Consider Shell. Seven years ago, the oil giant, synonymous with turbulent hot spots like Nigeria, decided to shift resources to more-developed nations that offered a friendly environment for investors and predictable tax regimes. Shell used to split spending on the upstream—the basic business of exploring for and producing oil and gas—roughly 50/50 between nations in the OECD and those outside of it. It’s now 70/30 in favor of the OECD, with the bulk going to Canada, Australia and the U.S.

“The risks in OECD are technical, but they’re easier to manage than political risk,” says Simon Henry, Shell’s chief financial officer. “In the OECD, you have more control of your operations.”

With the new turf comes a new focus: Shell will soon be producing more natural gas than oil. That might have scared investors a decade or two ago. But with gas demand set to grow strongly, especially in Asia, the future for gas-focused companies is looking increasingly rosy—especially after the Fukushima disaster, which prompted a rethinking of nuclear power in Japan and elsewhere.

Entrenching Its Position

Like Shell, Exxon Mobil Corp. is entrenching its position in the Americas, home to just over half its resource base. Its unconventional resources have grown by almost 90% over the past five years to 35 billion oil-equivalent barrels—partly thanks to its 2010 acquisition of XTO Energy, a big shale-gas player. Exxon’s U.S. unconventional production alone is expected to double over the next decade.

Some giants are looking further afield. Chevron Corp.’s three focus areas—the parts of the world that account for the bulk of its exploration budget—are the U.S. Gulf of Mexico, offshore West Africa and the waters off western Australia.

In particular, the company has staked out a huge position in Australian natural gas; its Gorgon LNG project in Australia is one of the world’s largest. The push is based on expectations of surging demand for the fuel in Asia, largely in China, which wants to improve air quality in its heavily polluted cities by switching from coal to gas in power generation and running more commercial vehicles and buses on natural gas.

It “wasn’t a conscious decision” to move into the OECD, says Jay Pryor, head of business development at Chevron. The company doesn’t decide what projects to pursue based on where they are in the world, but on the quality of the resource, the commercial terms and the geopolitical risk. “The best rocks with the best terms are going to get the quickest investment,” he says. Money has flowed into the U.S. and Australia because they offer the best incentives to oil companies, he says.

In recent years, Chevron has also expanded into another promising part of the OECD—Europe, which some estimates suggest has shale-gas reserves comparable to those in the U.S. Chevron has picked up millions of acres of land in Poland and Romania, where it will soon be drilling for shale gas. That’s part of a wider trend: Dozens of companies are now exporting to Europe technologies used to open up shale deposits in the U.S.

Holding Back

Not all oil companies have piled into unconventionals the way Shell and Chevron have. BP, for one, has far fewer investments in tar sands and shale gas than its peers, though it has an unrivaled position in deep-water oil. That means it has less of a presence in the OECD than Shell: Its biggest projects are in poorer countries like Angola, Azerbaijan and Russia, and in recent years it has won a string of licenses and contracts in India, Iraq, Egypt and Jordan.

Yet even BP has been bolstering its position in the OECD. It said recently it was pressing ahead with a £4.5 billion ($7 billion) investment in the North Sea’s Clair oil field, part of a five-year, £10 billion program.

Still, being in the OECD doesn’t guarantee oil companies an easy ride. Operators in the North Sea were shocked earlier this year when the U.K. government suddenly increased taxes on oil producers. In France, authorities recently banned hydraulic fracturing. And in the U.S., the drilling moratorium in the Gulf of Mexico, imposed after the Deepwater Horizon blowout, threw many of the majors’ plans into disarray.

But still, for the most part, the risks are much greater in the non-OECD. “The majors went to Venezuela and lost their property,” says Ms. Myers Jaffe of the Baker Institute. “They went to Russia and had to whisk their CEO off to a safe house. They went to the Caspian and realized they couldn’t get the oil out. I for one would much rather invest in a company that had 70% of its spending in the OECD.”

Original Article