Monthly Archives: March 2009

Carola Hoyos

On Energy Source:

BHP stalks Rio Tinto: That old chesnut

Elsewhere:

Santander sells Cepsa stake to Abu Dhabi fund IPIC (Reuters)

Grumbles about ineffective government stimuli for the green economy came from both sides of the Atlantic. The Guardian got its hands on a report that concludes Britain’s economic rescue package contains “negligible” spending on green measures. The report compares the £120m earmarked for the green economy with the £775m worth of bonuses are paid to staff at the Royal Bank of Scotland. Meanwhile, the New Yorker makes intelligent arguments against the principles that green job creation helps to cut unemployment and hybrids cars improve our climate dilemma. Instead, the recession will prove the biggest help to our adapting to climate change.

But even cap-and-trade is flawed as its suffers from one long chain of unintended consequences, Fast Company writes, detailing a Greenpeace a report concluding that carbon credits for forest preservation would crash the price of carbon by as much as 75 per cent.

The Wall Street Journal has an interview with Igor Sechin, Russia’s energy czar, who believes oil is Russia’s “God-given good”. But the most interesting thing he says is well within the body of the story: “It would be irresponsible for Russia to join Opec because we can’t directly regulate the activity of our companies,” as nearly all are privately owned. His assertion of the Kremlin’s light touch when it comes to energy may not be entirely believable, but at least this should put to rest the perennial speculation that the world largest oil producer has any ambition to join the cartel. One can almost hear Riyadh sigh with relief.

Another reason Russia is in no hurry to voluntarily reduce its oil production appeared in the Telegraph , which wrote about the IMF’s dire predictions for Russia’s economy.

And finally, if you are a real oil nerd, head to Rigzone for all you ever wanted to know about the state of the world’s deepwater and ultra-deepwater drilling projects.

William MacNamara

The Rio Tinto rumour mill is buzzing with the idea that BHP Billiton could yet again be interested in buying part or all of Rio Tinto, following a Sunday Telegraph report and a Friday  note from respected mining analyst Michael Rawlinson.

Revived speculation about a BHP-Rio megamerger follows from a wider controversy about Rio’s agreed deal with Aluminum Corp of China (Chinalco), which would see Rio selling stakes in top-tier mines and smelters to Chinalco, plus an exclusive chunk of convertible bonds, in return for almost $20bn that Rio would use to pay off crippling debts. Some powerful UK and Australian investors remain opposed to the deal, and Australian regulators are making signs that they might be more opposed to China’s creeping influence in the Australian resources sector than first thought.

Energy news from elsewhere:

- Obama energy ‘taxes’ have silver lining, analyst says (Platts)

- US government wants court to rehear oil royalty dispute (Reuters)

- China Coal Group says to invest $15bn in Xinjiang (Reuters)

Energy news from the FT:

- Russian group buys €1.4bn stake in Mol
European Commission concerned deal may undermine energy policy

- China’s Minmetals makes fresh proposal for Oz Minerals
New proposal excludes mine at centre of Canberra’s objections

- Renewables desperate to feel breath of funds
Ethanol producers hit especially hard

- Lex: Mol/Surgut

Carola Hoyos

Thomas Friedman this week calls for a Dow Jones index that reflects Mother Nature’s wellbeing (or lack thereof). What he might in fact want to do is take a leaf from Gretchen Morgenson, who wishes more shareholders would follow the lead of those willing to smoke out Chesapeake Energy’s overpaid chief executive.

We all know Mother Nature is feeling poorly, so perhaps what she needs more urgently than Mr Friedman’s Dow index is more active investors. Come to think of it, what investors of companies listed on the Dow need is an index that better highlights – and shames into submission – grossly overpaid chief executives and the board members that allow them to get that way.

Ed Crooks

On Energy Source:

- Tony Blair talks about green stimulus packages

- Russian enter Hungary as OMV sells Mol stake

- The “long aftershock” for oil supplies

- Oil will get more sludgy

- Earth Hour observed

Elsewhere:

2008 profits for Sinopec, China’s biggest refiner, were down 47 per cent at about $4.4bn, but beat analysts’ expectations. The outlook for this year looks better, but depends on government decisions on regulated fuel prices (Bloomberg)

NY Times story on the costs of renewable energy is savaged once (Grist) and again (Daily Kos)

Ed Crooks

OMV, Austria’s oil and gas company, has at last accepted defeat in its long battle to win control of Mol of Hungary, selling its 21 per cent stake for about €1.4bn. The really striking feature of the deal is the price that Surgutneftegaz, the Russian buyer, is paying: over Ft19,200 per share, almost double the market price of about Ft9,900 last Friday. OMV had appeared to be sitting on a substantial loss, but it has emerged from its Hungarian adventure roughly breaking even.

So why is the minority stake stake in Mol worth so much?

Carola Hoyos

The long term inexorable march toward poorer quality crudes will be interrupted by better grades coming from expansions in Saudi Arabia and West Africa, but won’t save refiners the cost and bother of retooling their equipment to deal with the ever sludgier stuff coming from newer fields (and our ongoing thirst for petrol and diesel - the lighter half of the barrel). It’s a tough conclusion by Sanford Bernstein and will affect refiners already bracing themselves for the changes they forced on them by Washington’s green revolution. Best positioned are the majors and sophisticated refiners such as Valero. US refiners, who have been more fastidious about upgrading their kit, have the edge over their European counterparts. The Indians, however, are a step ahead with the giant Jamnagar complex.

Energy news from the FT:

- India looks to China to fill power deficit
Chinese companies building $7bn in equipment for India customers

- Telecom Plus boosted by word-of-mouth support
Offers cheap gas and electricity in addition to broadband

- Coal sector back with rich seam of apprenticeships
Companies recruiting to counter effects of ageing workforce

Energy news from elsewhere:

- US to host forum on climate change (WSJ)

- Obama administration to appoint nuclear waste commission (Platts)

- Shares of offshore oil drillers poised to rise (Barron’s)

- Nine years after bust, California restarts daily electricity auction (WSJ)

- Crude-oil rally is vulnerable as contango widens, Goldman says (Bloomberg)

- Ex-Vitol trader Serotta to start $100m oil hedge fund (Bloomberg)

- China oil refiners swung to profit in first 2 months (Bloomberg)

- China’s Shenhua Energy earmarks $4.37bn for 2009 capex (Reuters)

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