Daily Archives: June 8, 2009

Kate Mackenzie

So say quantitative strategists at Merril Lynch/Banc of America Securities, who compared monthly stock returns of energy companies to the overall S&P 500′s return and the monthly oil-price change. They concluded that most analyst estimates for the energy sector have not caught up to oil price increases.

Usually, there is a lag of about three months between price changes and estimate revisions, and at the moment this is reflecting badly on energy valuations. Read more

Kate Mackenzie

Iran’s South Pars gas field has long been the subject of difficult negotiations, made more difficult by US-led crackdown, launched under the previous administration, on Iranian investments. Meanwhile, the terms demanded by Iran are also viewed as too onerous by some of the oil majors.

Shell and Repsol last year pulled out of plans to invest in phase 13 of South Pars, and not long afterwards French peer Total said it would hold off making fresh investments because of the “extremely delicate” political environment. This looked like posing a problem for Iran, as gas liquefaction requires substantial technical expertise that is difficult to get without involvement from a big international oil company.

Reports in the past week have suggested CNPC had taken over the role in the upstream project, and today Petronas said it was still going to be involved and would work with CNPC, which would further suggest  Total is firmly out of the picture.

But the story is not quite so simple. Read more

Kate Mackenzie

On Energy Source:

Oil is the great unknown for airlines  Read more

By Tracy Alloway

The International Air Transport Association, IATA, has issued its latest industry earnings forecast and the outlook has deteriorated.

The world’s airlines are now forecast to lose $9bn this year. The newest 2009 forecast is double the level IATA predicted in March, with the increase mostly down to a further collapse in yields, or average ticket prices.

While lower yields are practically a given at this point, a less certain component of the 2009 loss figure will be the oil price. IATA’s newest forecast sees the industry’s fuel bill at $106bn in 2009 versus a 2008 fuel bill of $165bn, when oil averaged circa $99 a barrel. While IATA doesn’t specifically say in its latest press release what oil per barrel price the 2009 fuel bill projection is based on — it would appear to something like an average of $50 a barrel this year. Read more

Kate Mackenzie

Todd Stern, the United States’ chief climate change negotiator, science advisor John Holdren and other energy officials flew into Beijing yesterday for three days of talks. The countries together emit more than 40 per cent of the world’s greenhouse gas emissions, But how far will these talks get, given the many points of contention between them – and that there is only six months until the crucial Copenhagen meeting?

It was House Speaker Nancy Pelosi’s turn late last month and while she said she was optimistic about the prospects for moving towards Copenhagen, she was “not putting any deadline on it“.

China has been clear about its demands recently: it wants a 40 per cent cut in emissions from developed countries from 1990 levels (larger than they are willing to commit to); an 0.5 to 1 per cent contribution of GDP from developed to developing countries, and sharing of clean energy intellectual property. None of these demands are welcome from the US. But what is China planning to do in return? Read more

Kate Mackenzie

Miles Johnson writes:

Commodities prices dipped on Monday as a strengthening US dollar dimmed the appeal oil and gold as alternative investments. Read more

Sheila McNulty

BP and Shell have both said it, and now Cambridge Energy Research Associates is saying it, too: the runup in equipment and services in the oil and gas sector in recent years is over.

IHS CERA, the consultancy, says its Upstream Capital Costs Index, which tracks costs associated with the construction of new oil and gas facilities, fell 8.5 per cent over the past six months to an index level of 210 points. The IHS CERA Upstream Operating Cost Index, which measures operating costs for those facilities, fell 8 per cent to an index score of 187.

Values are indexed to the year 2000, meaning capital costs of $1bn in 2000 would now be $2.1bn. And the annual operating costs of a project would now be up from $100m in 2000 to $187m.

This is good news for the sector on two fronts. Read more

James Fontanella-Khan

- Ferrexpo rebels told to sell their shares
The ceo of the London-listed group hits back at dissident investors (FT)

- US climate bill to cut deficit, budget office says
The legislation likely to raise $846.6bn (Bloomberg) Read more