While you were sleeping: Opec wrap-up
We’ve written a lot about the Opec meeting in the last few days, much of it from Carola Hoyos at the meeting in Vienna. Here’s what you may have missed:
Opec’s effect on oil majors analysed
Sunday:
Opec decides against steeper cuts
11 out of 15 bet on compliance
Saturday:
Is $67.50 oil the new $75?
Saudi Arabia’s King Abdullah likes $75 a barrel oil. But Ali Naimi, his oil minister, appeared to tweak the kingdom’s oil price ideal to $60-75. “Forty dollars is not enough, you need between $60 and $75 dollars to allow marginal producers to continue producing ethanol, heavy oil,” Mr Naimi said this morning at a conference in Geneva, according to AFP. He said today’s low oil price of $44 a barrel was just as unsustainable as the soaring price of last summer, when futures rallied to a record $147. But Mr Naimi may not be going soft. With the dollar’s recent rise, maybe $67.5 is the new $75 for Opec members, all of whom sell their oil in dollars. Yesterday, the group proved it could live with lower prices for a little longer, by deciding not to embark on a new round of production cuts, despite the risk that this could push down oil prices as seasonal demand fell because of the end of the winter heating oil season in the western hemisphere. So far the market has shrugged its shoulders.
BG close to Pure Energy success
BG Group of the UK has moved a step closer to winning Pure Energy of Australia, now its rival Arrow, also of Australia, has dropped out of the contest. The game really seemed to be up for Arrow when Shell, which is its joint venture partner, decided to sell out to BG. It is very good news for BG’s ambitions to develop its Australian coal bed methane business: perhaps rather better news than the company liked to admit.
Opec goes on the offensive
Abdalla Salem El-Badri, Opec’s secretary-general, went on the offensive today, perhaps emboldened by the cartel’s decision yesterday to spare the world economy another round of production cuts. Over a breakfast served on plates emblazoned with Opec’s light blue logo, Mr El-Badri called for rich countries to do something about the economic mess into which they had plunged the world. He also had stern words for Russia. Though diplomatic enough not to call her by name, Mr El-Badri made clear Opec was tired of lectures by the country’s high ranking officials about how to improve the oil market. Instead, Opec wants the world’s largest oil producer outside the cartel to stop free-riding and enact voluntary cuts of its own.
Shell feels the cash squeeze
When Shell sets out its annual strategy presentation to analysts and the press tomorrow, apart from explaining the flaws in its reporting of its CO2 emissions, it is likely to face intensive questioning about what is probably the biggest capital spending programme in the world. In their note this morning on the oil majors – which also includes the interesting chart about exposure to Opec – the analysts at Sanford Bernstein raise questions about the health of Shell’s cash position.
The Source: Opec reaction and analysis; Maldives; Iran; Where are the mergers?
On Energy Source today:
Opec’s effort on the oil majors analysed
Opec decision does not change the price of oil
Maldives takes the moral highground
Elsewhere:
Cars: Iran wants a third of its cars to run on natural gas within five years (Energy Tribune)
Resources: IBM to sell water management technology and services. It’s estimated 20% of California’s energy use is related to water (CNet)
Solar: Saharan panels could power Europe (Consumer Energy Report)
Industry: Prices are right, so where are the oil and gas mergers? (The National)
Oil: High oil prices and the digital future: a slightly tenuous analogue-digital analogy (Guardian)
Oil: Oilwatch Monthly March 2009 – a wrap of production and consumption statistics (The Oil Drum)
Natural gas: Iran signs $3.2bn deal with China on South Pars (LA Times)
Emissions: Do we have the green technology we need? Some experts argue that focusing on incremental reductions diverts attention from big breakthroughs that are needed to substantially reduce emissions (Newsweek)
Ethanol: Everyone hates it, including the WSJ editorial board (WSJ)
Opec’s effect on the oil majors analysed
As Opec ministers decide to leave production levels unchanged, but insist on full compliance with the 4.2m barrels per day reduction agreed in stages in the second half of last year, Sanford Bernstein has an interesting chart indicating the likely effect of those cuts on the oil majors. The title: “Estimated oil production from Opec countries in 2008 as a % of total company production”. (Click through for full-size chart view):
Opec’s demand balancing act
Oil consumers will be welcoming Opec’s decision not to further cut oil production, particularly with the fragile world economy which was highlighted by the IEA and the US ahead of Opec’s decision.
It wasn’t purely benevolence on Opec’s part however, but rather an assessment that the more acute a worldwide recession is, the more difficult it will be for oil demand to rise sustainably. In other words, too steep a price hike now could prove counter-productive in the future. Opec says $70 – $80 is needed to maintain investment in future production, and price stability is its key stated goal.
The story of biochar
Biochar, as the BBC’s Today programme noted this morning, is creating great excitement in the scientific world as a way to reduce greenhouse gases. Biochar is created by burning biomass with minimal oxygen, and it provides a way to lock up carbon in a stable form, as well as an unusually long-lasting fertiliser and gas that can be used for energy.
An FT Magazine cover story three weeks ago explains the benefits and shortcomings of biochar and its intriguing origins. For many years a dark compost-like substance had been prized by farmers in the Amazon basin, known as terra preta do indio – literally, “the dark earth of the Indians”.
Maldives takes the moral high ground with carbon neutral plan
Sweden last week announced plans for 50 per cent of its energy to come from renewable sources by 2020, but the Maldives is taking an even higher moral ground, with plans to be completely carbon neutral in 10 years. The tiny archipelago nation, which is 1.5m above sea level, has already explored buying land in other countries.
Mohamed Nasheed, writing in the Guardian today, appealed to world leaders to stop ‘playing chicken with Mother Nature’.
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