Daily Archives: February 26, 2009

Ed Crooks


Source: Centrica

The most noteworthy feature of today’s results from Centrica, Britain’s biggest energy supplier, is the 36 per cent rise in tax payments to more than £1bn. The reason: a shift in the mix of profits away from the downstream and towards the more highly-taxed upstream business, giving a group tax rate of 53 per cent which is the highest of any large British company. Even Shell and BP pay a lower rate.

Centrica’s problem is that its gas production is concentrated in the UK, where on most of its fields it pays a 75 per cent tax rate.

It is not just Vladimir Putin and Hugo Chavez who know how to gouge the industry.

Ed Crooks

The most striking feature of OMV’s full-year results on Wednesday was a 20 per cent cut in the annual dividend.

OMV is not the first oil company to do so, and Wolfgang Ruttenstorfer, chief executive, suspects it will not be the last. For investors in oil shares, that is a troubling thought. Generous dividends are the best reason for holding big oil shares: many of them are paying 6 or 7 per cent yields, at a time when money in the bank gets you virtually nothing. That is why the oil majors have greatly outperformed the stock market as a whole over the past six months.

Kate Mackenzie

Today on Energy Source:

Colonialism, ethics and China’s emissions growth

Inventories and the market’s reaction

All you need to know about electric cars

Hayward: US needs tapering alternative fuel assistance and more drilling

Worth reading elsewhere:
The last TWIP in February: Will our little price break be over soon?

Could carbon caps work as a stimulus?

The rise of nuclear power in the Middle East and Africa

In case you haven’t heard enough of T Boone Pickens

Why enviros are warming to nukes

Welcome to Washington, Dr Chu

First Solar breaks $1 per watt barrier; but Short term outlook difficult

Can electric eels save the world?

Paul Collier, development economist, criticises climate change economics

Kate Mackenzie

Is it unethical to blame China for its carbon emissions when a large part is emitted in the name of producing goods for western markts? Or is it twisted logic to overlook the side effects a country’s deliberately export-led economic strategy?

After being criticised for some time now for its export-focused, savings-heavy economic policies, not to mention its policy on the renminbi, a report this week argued that China was being unfairly blamed for its carbon emissions, when much of those emissions are created by its production of consumer goods for western countries.

To recap the popular Guardian story, a Norwegian study to be published in a scientific journal “shows that half of the recent rise in China‘s carbon dioxide pollution is caused by the manufacturing of goods for other countries – particularly developed nations such as the UK.”

Kate Mackenzie

BP’s chief executive Tony Hayward writes about US energy independence in today’s WSJ  – two days after API chairman and other oil luminaries testified in Congress, making their arguments for the importance allowing of drilling the outer continental shelf.

Reaching those goals begins with rejecting the false choice between “drill, baby, drill” and a near-exclusive focus on alternative energies and conservation. An “all-of-the-above” approach holds far more promise.

He welcomed Obama’s commitment to invest $15bn a year in clean and renewable technologies and more efficient vehicles, but laid out his advice for policymakers. First, avoid an ‘adversarial’ stance between government and the energy industry. Second, recognise the importance of free trade in energy markets and avoid protectionism. Third, have transitional incentives for carbon abatement – but make sure they taper away over time.

His fourth point: the US must develop its own hydrocarbon endowment. He echoed the statements by the API chairman Larry Nichols to the House Natural Resources Committee (160,000 jobs in 2030; $1.7trillion in government revenues).

No one in the energy business thinks America can drill its way to energy security. But a policy based exclusively or even primarily on conservation and efficiency is a recipe for ongoing scarcity and economic decline.

Kate Mackenzie

Oil markets yesterday were volatile when the weekly EIA report showed US crude inventories rose by 700,000 barrels, half the consensus forecast of 1.4m. Trading was volatile as reactions to the data shifted, but both WTI and Brent closed higher.

It’s a sign of the times that oil prices are rising because the increase in inventory surplus is lower than expected.

A longer term view does not suggest things are completely rosy on the demand side – remember, prices were rising by this time last year enough to affect demand.

Stephen Schork wrote this morning (emphasis ours):

Yesterday the U.S. government reported that net stocks of
crude oil rose to an 84-week high, up 0.2 percent to 351.3
MMbbls for the week ended February 13th. On one hand, the
year-on-year surplus narrowed to 42.8 MMbbls (+14%) and
the surplus to the 2003-2007 range narrowed to 50.1 MMbbls
(17%). On the other hand, supplies remained entrenched in
the 96th percentile (1983 – present)
and moved to within 10.4
points of the highest level (391.9 MMbbls) on record.

Kate Mackenzie

The Oil Drum Europe has a guest post by Joost van den Bulk based on his Masters thesis in environmental science, which goes into some detail on electric cars and finds the total cost per kilometre is lower than a comparable combustion car.

He compares costs, efficiencies, and environmental impacts, and looks at the effect of likely future developments, and concludes:

“The total costs per kilometer of a compact electric car are at 2008 oil prices 5.5 cent lower than total costs of a compact combustion car…”

However by 2020, based on a scenario including larger scale production of batteries, increased kilometres driven, and a C02-linked tax-per-kilometre, this cost advantage is estimated 4.9 cents.

It is worth pointing out that at least some of van den Bulk’s inputs are specific to the Netherlands – for example in his parameters for comparing costs of combustion versus electric cars, road tax for an electric car is zero; and in measuring environmental impact he considers the Dutch mix of electricity sources.

Energy news from elsewhere:

- US ethanol companies may seek federal action, CEO says (Bloomberg)

- Venezuela to push for new oil cuts at OPEC meet: finance minister (Platts)

- US interior secretary scraps oil-shale leasing (Houston Chronicle)

- New US, Canada, Europe alliance formed to promote biofuels (Platts)

- Poland’s largest oil refiner posts first ever annual loss (Bloomberg)

- US gas industry creates another advocacy group to promote fuel (Platts)

- Australia’s Origin first-half profit up (Reuters)

- Australian coal-gas sparks a deal boom (WSJ)

Energy news from the FT:

- Total to back Trans-Sahara gas pipeline
Project is potential route to cut dependence on Russia

- Co-op to fund Canadian oil sands fight
Move could hamper plans by BP and Royal Dutch Shell

- OMV cuts dividend for ‘difficult times’
Austrian oil group to also cut capex

- Sibir suspends chief executive over property dealings
Henry Cameron to be replaced by deputy

- Heat is on for UK suppliers to cut gas prices
Weak demand spurs decline in wholesale prices this year

- Santander revives Cepsa stake sale talks
IPIC of Abu Dhabi tops list of potential buyers

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