Baby, we are drilling...  

Once oil companies began including the full costs of sourcing in developing nations, the economics of producing at home, or at least countries with functioning democracies, looked a little better.

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." [More]

While I was impressed with the possibilities for domestic natural gas production, once again I was several beats behind the march away from the Mideast.

It would be ironic if after pouring enormous resources of every kind into that area, it becomes a auxiliary supplier for the US.

Meanwhile, the mismanagement of Russia's resource-based economy seems to have been noticed by its citizens.

First, political optics are particularly important in Russian politics. Mr. Putin has always promised stability, and this was based to a significant degree on his perceived invincibility and the power of deterrence that his rule, via the “power vertical” system, conveyed. There was a sense of inevitability to his policies, reinforced by the strength of both his personality and of the political machinery supporting him. Mr. Putin, therefore, looked to elections as in part a legitimizing ritual in a political order that – as it moved ever further away substantively from Mr. Medvedev’s declarations of fealty to democracy – has come to occupy an increasingly thin border between limited democracy and full authoritarian rule. Yet, with the regime’s invincibility now severely dented, critics and opponents will undoubtedly be emboldened in opposing government policies, challenging the pervasive corruption, and demanding a fairer distribution of incomes and resources at a time when Russia’s one-dimensional, resource-driven economy, is confronting growing challenges.
Second, Mr. Medvedev’s future itself has become cloudy. He had to deliver the votes during the parliamentary election if he was to be given the prime ministership. He had already lost whatever credibility he had with the electorate with the closed-door decision to switch the two top governing positions. Now, despite all of the administrative advantages that the ruling party had – where it could mobilize workers; control the television medium; use its judicial connections to fine Russia’s leading independent vote monitor, Golos, for alleging electoral violations; employ other connections to mysteriously shut down communications broadcast from independent radio stations such as Ekho Moskvy, and blogging platforms such as LiveJournal; as well as the widespread, scathing allegations of thousands of violations of electoral rules by external and internal observers – United Russia still had a relatively poor showing. Mr. Putin has a history of not tolerating politicians who do not deliver as he expects.
Third, the election is also an indicator of a brewing legitimacy crisis in Russia. As the late Harvard scholar Samuel Huntington wrote, “performance legitimacy” plays a critical role in authoritarian regimes. When Mr. Putin was able to deliver growth and increasing public goods to the population, the legitimacy of his rule seemed solid because he reinforced it with an image of personal vigour and determination. Given Russia, however, is confronting massive structural problems due to its reliance on energy, with the vast Reserve Fund used to prop up the economy during the recession now largely depleted, and a demographic time bomb of extremely low birth rates, a shrinking population and a disintegrating health care system, not to mention an outflow of funds to Western safe havens, performance legitimacy is an increasingly less viable option within Mr. Putin’s social contract that trades freedom for security. [More]

While not the only vehicle, I think this is another piece of evidence that the Internet will increasingly play a bigger though as yet undefined role in public policy development and politics. And I mean everywhere.

[Note: Re-reading this, I realized it maybe should have been two posts, but one thing reminded me of the other. And you learn to write it down immediately. This is how 60+ year-old minds work.]

[Oh yeah - yours will too.]