High oil prices have pumped billions of dollars into the coffers of OPEC and non-OPEC producers alike. Thanks to that, 2006 will go down in history as the year that governments got feisty. Some would say greedy; others would say patriotic. Here in politically "safe" North America, we've watched with alarm the bold moves made by Venezuela's Hugo Chavez, Bolivia's Evo Morales and Russia's Vladimir Putin to more or less nationalize their oil and gas assets, whether de jure or de facto. We've even seen the U.K. change the tax regime for the North Sea, causing operators some consternation there. Internationally driven E&P companies are learning that the soft skills of negotiation and diplomacy are more important than ever, if they want to preserve their international oil and gas interests. But you think there is no country risk if you stay in America? Think again. Country risk is relative. It can change in an instant, so let's not be too smug. Recent events remind us that game-changing political risk lurks here in our own backyard. Louisiana Gov. Kathleen Blanco, an industry friend in the past, scored a direct hit when she successfully sued the federal government to stop OCS lease sales until an updated, full-blown environmental impact statement for her coastline can be completed. This will likely delay the March 2007 Central Gulf lease sale, usually the largest of any given year. Decades of petroleum development onshore and offshore have scarred Louisiana's wetlands and made the state vulnerable to hurricane-induced tidal surges, according to Blanco. The U.S. Geological Survey said recently that Katrina and Rita wiped out 217 square miles of land that is now under water. For more on this, see the December issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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