Daily Archives: May 11, 2009

No fewer than 60 oil service companies in Venezuela – including Williams, Wood Group and Boots & Coots – were in for a nasty shock when President Hugo Chavez began to expropriate their equipment and installations on Lake Maracaibo, the nation’s oil heartland, last Friday. Venezuela’s socialist leader indicated that takeovers will continue this week in the east of the country. Although larger companies like Schlumberger and Halliburton have so far not been affected, with the government leaving rigs alone, they are keeping their heads down.

What kind of signals will all this send to the 19 oil companies – both oil majors and foreign state corporations – currently preparing bids for what is touted as the biggest oil auction on earth?

Kate Mackenzie

There were plenty of reports over the weekend about a glorious new agreement signed in Prague that will advance the Nabucco pipeline project – an ambitious €9bn plan to diversity Europe’s gas supplies, and reduce dependence on Russia in particular.  Czech Prime Minister Mirek Topolanek described it as “a new silk road” as a deal was signed by leaders from Europe, Azerbaijan, Turkey and Georgia.

But just hang on a minute. Where are the other gas suppliers?

Carola Hoyos

Good news travels fast. Shares in DNO, the Norwegian oil company, whose greatest claim to fame is that it produced Iraq’s first new oil since the end of the US invasion, rose as much as 29 per cent today. The company has been given the go-ahead to use the main Turkey-Iraq pipeline instead of exporting its oil via truck.

As long as all goes to plan, DNO will be able to send the oil via the pipeline from June 1. Addax, the Swiss company, sits in a similar boat. The volumes involved add up to less than 100,000 barrels a day: a lot for the two small companies, but for Iraq – given its huge 2m + production and huge potential – it’s not enormous.

Kate Mackenzie

On Energy Source:

Commodity ETF investors move significantly into natural gas

Markets: Pullback, but the disconnect continues

As production falls, Repsol pins hopes on Brazil
Elsewhere:

Opec set to keep supply targets - Kuwaiti, Iranian and Algerian representatives plump for holding quotas as Opec forecasting ramps up (The National)

StatoilHydro profits fall less than expected Output increase beat analysts’ expectations (Upstream Online)

The business divide over climate legislation Duke Energy quits a business group that opposes mandatory caps on carbon emissions (TNR)

It’s not all or nothing in the oil versus alternatives debate Offshore oil must be drilled for, but other energy sources must also be pursued (BusinessInsider)

The USO ETF’s command of the WTI crude market has taken a breathtaking drop in the last few months. Having held close to 100,000 WTI contracts at the end of February (amounting to nearly 20 per cent of the WTI market) it has now halved to some 50,000 contracts.

So where did all that money go?

Kate Mackenzie

Evidence of “green shoots” emerging from leading indicators in developed economies has helped to lift prices. Traders have also pointed to rising hedging activity by consumers and a pick up in speculative interest as further signs that market activity is strengthening.

ICE June Brent fell $1.37 to $56.77 a barrel while Nymex June West Texas Intermediate lost $1.35 to $57.28 a barrel after reaching a fresh 2009 high on Friday at $58.75.

“Should equity markets, which have been a heavy influence on energy prices, continue to rally then oil could take out $60 this week,” said David Hart at Hanson Westhouse. “However, fundamentals in the oil market remain less bullish.”

Read more in today’s FT commodities report.

Related links:
The coming oil-equity disconnect or the end of efficient markets theory? (FT Alphaville 08/05/09)

Kate Mackenzie

Spain’s biggest energy company, Repsol, has published details of a big gas find in Brazil’s deepwater offshore Santos Basin.

Repsol last week announced profits down 57.4 per cent for the first quarter of 2009, compared to a year earlier. Its production also fell 5 per cent, substantially worse than some of its supermajor rivals – BP’s for example rose 2 per cent. Total, however, also reported a 4.3 per cent fall in production last week.

Total is seeking to make up some of the shortfall in Nigeria while Repsol is looking towards Brazil, where it has stakes in some of the country’s rich deepwater fields.

Repsol today revealed some details of the Panoramix well, in a field in which it has a 40 per cent stake. Panoramix has maximum gas flows of 378,600 cubic metres per day and maximum flows of 1,570 barrels of condensate.

The numbers sound good but a Citigroup note pointed out that there was no mention of whether the flows are unrestricted, or of the extent of recoverable reserves.

Repsol announced several discoveries in Brazil’s waters in the first quarter, including one well called Piracuca which it says has an estimated 550m barrels of oil equivalent.

A long-delayed UK government announcement on smart meters has finally been delivered – albeit with some detail yet to be filled in.

But will they actually lead to reductions in energy use?

The short answer is yes, but not in the way that you’d think.

- China’s crude oil imports near record high in April
Evidence oil demand in China is picking up (Reuters)

- EDF to sell British Energy stake to Centrica
UK gas group to pay less than expected £2.25bn (FT)

- Venezuela’s Chavez seizes oil service companies
Move paves way for takeover of oil contractors (Reuters)

- Australia’s Santos to raise up to A$3bn
Funds will go towards LNG project in Papua New Guinea (FT)

- UK’s CBI makes plea on greenhouse gases
Urges companies use one standard for reporting emissions (FT)

- Repsol profits more than halved in first quarter
Spanish energy group is latest to report weak results (FT)

- British Gas cuts electricity prices by 10%
Other suppliers expected to follow suit (FT)

- German nuclear phaseout seen boosting gas demand up to 23% by 2023
Christian Democrats warn of greater dependence on foreign supplies (Platts)

- Lex: Oil prices

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