Daily Archives: June 19, 2009

Kate Mackenzie

Quote of the week

“We’re not against alternatives and renewables. But to say we want to get off fossil fuels to (replace them with) an alternative is unrealistic.”

- Jim Mulva, chief executive of Conoco Philips, says – similarly to many of his big oil peers – that oil and gas will be needed for decades to come

Image of the week: Solar balloons

Scientists at Cool Earth Solar in Livermore, California, display their solar ‘balloon’: the concentrator consists mainly of thin-film plastic and air, and concentrates the sun’s rays 400 times. Not as silly as it might sound, according to The Economist (see also: floating wind turbines).

Number of the week:

6%

The increase in China’s oil demand (year-on-year) in May.

PLUS: Energy Source posts of the week:

That €400bn Europe-Africa solar plan, explained 

The Gazprom song, and the responses

More from Goldman on its renewed bullishness on oil

What Monty Python can tell us about commodities, via John Authers

How climate change is coming to a neighbourhood near you (if you live in the US or in the UK)

Foreign oil executives watch Iran’s protests and wonder…

Kate Mackenzie

Neil McMahon at Bernstein Research says it’s not peak oil, but peak well flow that is the problem. He does however touch on similar themes advanced by peak oilists; namely that remaining oil reserves are becoming more difficult, and expensive, to recover. He recounts the phenomenal flow rates of some of the most famous ‘gushers’ of bygone days, notably the Lucas I well at Spindletop, Texas.

Finds such as this were ‘drilled to death’ and flow rates fell, especially as pressure subsided. High flow rates had something of a renaissance thanks to the North Sea and other offshore discoveries of the 1980s and 1990s, and McMahon writes that these flow rates were critical for the expensive and difficult engineering required to develop the fields.

Today, however, he writes that the industry is not coming to terms with the lower flow rates that newer discoveries will provide.

We have been so used to field developments that have produced 30 kbbl/d, or even 40 kbbl/d in the case of Thunder Horse, that the new phase of developments are likely to come out at half that number. So why will these flowrates drop by half, and won’t technology come along to save the day yet again?

Kate Mackenzie

Kosmos Energy, a privately-held oil company with a stake in Ghana’s newly-discovered oil reserves, has been the subject of interest from China and India’s ONGC. Now Shell is rumoured to be looking into Kosmos – although with Shell’s substantial operations in nearby Nigeria it would be somewhat surprising if they hadn’t considered it.

Kosmos, which is backed by private equity groups Warburg Pincus and Blackstone, is up for sale with a decision expected in July. It has just over 30 per cent stake in the Jupiter field in the Gulf of Guinea, which holds more than 1bn barrels of recoverable oil, making it one of the significant finds in recent years. However oil majors have not yet become involved in Ghana.

Two fellow small oil contenders are involved in Jubilee; Anadarko of the US, with an equal share of the field, and UK-listed Tullow with just under 23 per cent.

The past few months have seen massive interest in small oil companies as the recession has seen oil companies perform well relative to other sectors, while oil falling from last year’s highs created investment opportunities for some. Heritage Oil’s merger with Genel Energy and Chinese interest in Addax, while Dragon Oil sold its outstanding shares to Dubai’s Emirates National Oil Companies. And the interest in Kosmos certainly won’t hurt Tullow, which has also had some exploration success in Africa, and whose shares rose as much as 4.36 per cent today.

Related links:

Energy groups lured by Ghana’s Kosmos (FT, 04/06/09)

Kate Mackenzie

On Energy Source:

Markets: Oil rises towards $72

Google leans towards one-way charging for plug-in vehicle software

Listing options for Glencore

China oil demand rebound?

The pitfalls of natural gas as the default climate change option

KazMunaigas steps up its investment plans: another sign of recovery

Greenhouse gas emission counters

UK’s turn for climate change effects-by-region forecast

Elsewhere:

Is Steven Chu too much of a techno-geek?
Does he put too much faith in energy breakthroughs? (Salon)

‘Wind can power up entire nation’
Says director of China’s National Climate Centre (China Daily)

Greenpeace parody of newspaper spotlights climate change
International Herald Tribune the target (IHT)

First monthly travel increase since October of 2007
Green shoot or mustard seed? (SeekingAlpha)

Talk of ‘kinetic energy plates’ is a waste of energy
So says David MacKay (Guardian)

Oil prices rose back towards the $72 a barrel mark on Friday, with bullish sentiment bolstered by yesterday’s improved US economic data and continued supply concerns in Nigeria.

Oil futures, which many investors have been purchasing to gain exposure to a recovery in global economic activity, ticked upwards yesterday after an influential business activity index from the Philadelphia Federal Reserve posted its highest reading since before the collapse of the investment bank Lehman Brothers sent shock waves through global markets last September.

Attacks on pipelines by militants in Opec member Nigeria, through not widely seen as market moving news, helped to provide a reminder to energy traders of political risk factors alongside the ongoing election dispute in Iran.

Nymex July West Texas Intermediate oil, the US benchmark, rose 68 cents to $72.05, while the August contract rose 72 cents to $72.63. ICE August Brent, its European equivalent, gained 74 cents at $71.80.

Read the full commodities report

Kate Mackenzie

Google is writing software with “vehicle dispatch algorithms” to help smooth out demand for electricity that plug-in vehicles could create, CNet reports. It’s not the first time Google, or more specifically its philanthropic arm Google.org, has ventured into electric cars; two years ago it announced grants worth a total of $10m to electric car research programmes, and also said it would explore “vehicle-to-grid” technology directly with Pacific Gas & Electric.

Google.org’s on FAQ on the subject shows there was hope that electric cars could act a kind of baseload power source, allowing the grid to draw back energy from vehicles, rather than turning to fossil fuels at times when generation from solar and wind power was insufficient.

But CNet’s report suggests said Google has moved away from vehicle-too-grid in favour of a one-way charging because it can be implemented more quickly, with less need for advanced grid technology.

By Neil Hume

There’s just one thing missing from Friday’s news that Glencore, the ultra secretive Swiss trading house, is exploring a stock market flotation, and that’s a concrete sense of where it might list.

London is mentioned in passing but we wonder if a dual listing here and in Switzerland is the most likely option.

Kate Mackenzie

China’s oil demand in May rose for a second month in a row, year-on-year, according to Platts’ analysis of official data – the second highest level ever. It followed an increase in April that was the first in six months.

The analysis is based on Chinese official figures, which do not explicitly cover consumption, so it doesn’t preclude factors such as building reserves, or restocking, which the latest monthly IEA report pointed to.

China’s own crude output fell 1 per cent in the month, which Platts says is affecting international trade:

“Falling crude oil production in China means its rebounding demand is having a disproportionally large affect on international oil trading. China imported 17.09 million metric tons — about 4 million barrels a day of crude oil last month. That was the second highest month of crude oil imports into China, ever,” said Dave Ernsberger, senior editorial director for Asia at Platts.

However Platts’ Oil Drum blog points out that in May last year China was building big stocks of diesel, making this year’s gain more notable.

Related links:

Platts media release: China oil demand jumps for second consecutive month
China’s reserves: another explanation for stronger oil prices
(22/05/09)

- Commodity trading powerhouse Glencore explores listing
Partnership structure seen as barrier to growth (FT)

- Glencore taps rich seam of commodities
Firm’s unique model makes it key world player (FT)

- PetroChina in talks on UK investment
Move would be company’s first into European refining (FT)

- Indian Oil may spend $1bn on acquisitions, chairman says
May buy oilfields as it increases processing capacity (Bloomberg)

- Bluenext signs Chinese carbon credit deal
Deal creates trading platform for Chinese emission credits (FT)

- Almost 900 strikers sacked at UK Total refinery
Strike prompts sympathy walkouts at British power stations (Reuters)

- Gazprom increases its hold on Sibir
Appoints new chief executive (FT)

- Argentina’s YPF to spend $380m on refining upgrade
Aims to expand capacity for higher-quality diesel and gas (Platts)

- Santos signs LNG deal with Petronas
Agreement is milestone for Gladstone LNG project (FT)

- Lex: Glencore and BHP/Rio and China

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