Daily Archives: July 6, 2009

Ed Crooks

RusHydro, the Russian hydro power company, listed its shares in London today, and set out its vision of how huge volumes of electricity could be exported to meet China’s growing energy needs.

In many ways, hydro power is the best of all energy sources: carbon free, proven technology, long-lived and with very low marginal cost. The problem is that there are not enough suitable rivers. The potential of hydro power is strictly limited by geography, and in most western countries all the suitable sites have been used. As a result, large-scale hydro has very little potential for growth.

In emerging economies, however, the position can be very different. Where France and Germany have used up about 95 per cent of their hydro power potential, and the US 82 per cent, Russia has used just 19 per cent of its potential. In Russia’s far east, including east Siberia, the scope for development is even greater. That creates a huge opportunity to export Russian electricity to China. There are, however, some daunting challenges to be overcome.

Kate Mackenzie

Peru has just 0.1 per cent of the world’s oil reserves, but that’s nothing to be sneezed at given the country’s average per capita GDP is $8,400.

An interesting piece in the Guardian looks at reports of ‘uncontacted tribes’ in Peru’s part of the Amazon – proof of whose existence would have big implications for oil exploration there.

The existence of such tribes in Brazil and Ecuador is not contested, but in Peru the question is a little more difficult. The country’s president is scornful of the claims of Peruvian uncontacted tribes, and says it is a ruse to prevent oil exploration. Peru has been rapidly allocating large parts of its share of the Amazon for oil and gas exploration in recent years. Much of the focus is on Lot 67, which has been licensed to Perenco, an Anglo-French oil company. An environmental impact assessment concluded there was no uncontacted tribes currently living in the area, but three of the report’s authors say they believe that such tribes do still live there.

Either way, the classic scenario of tension over natural resources is building for Peru’s ‘discovered’ minorities. The ‘nativos’ in Lima, the story says, took direct action last year against proposed new laws allowing energy projects in the Amazon which resulted in the government pulling back on some of those laws.

Kate Mackenzie

Hopes are not high for any strong resolutions on climate change at the G8 meeting beginning on Wednesday in L’Aquila, Italy – one of the more significant events held in the lead-up to the Copenhagen meeting in December. To be fair, some lofty goals will probably be announced this week: the eight western member countries plan to launch an ‘aspirational goal’ of a 50 per cent cut in carbon emissions by 2050, reports the WSJ. The BBC’s Roger Harrabin says the communique will also state that countries should seek to avoid a climate rise of more than 2°C – the level seen as critical by many scientists.

The 50 per cent reduction is a huge undertaking, but then 2050 is a nice, long way off into the future. The problem is the trajectory emissions take until then. They must peak a long time before that – most estimates put it at about 2020 – for a good chance of avoiding severe climate change.

Kate Mackenzie

On Energy Source:

Xinjiang unrest: The oil and gas connection

Markets: Commodities stage broad retreat

Lining up for Repsol’s YPF

Elsewhere:

Lots and lots of small cars: the auto industry of the future (Christian Science Monitor)

Thomas Friedman worries that the US will be buying its energy future from China as the country’s renewable energy spending expands rapidly (NY Times)

It was good enough to destroy the Spanish Armada: EU energy commissioner defends wind energy (europa.eu)

Nuclear costs in the US, compared to other energy sources (Atomic Insights)

Evaluating forecasts for peak oil production (The Oil Drum)

Kate Mackenzie

Xinjiang in western China is a province rich in natural resources – a fact not unconnected with the unrest in which 140 people have died in the past few days. The region’s oil and gas riches have been a growing source of tension between the province’s original Uighur residents and the mostly Han migrants from the east, who now make up the majority of the population.

Last year the FT’s Jamil Anderlini visited the region and described the desert surrounding the city “punctuated every kilometre or two by oil and gas derricks, each of them topped with the red Chinese national flag, an assertion of sovereignty over every inch of the energy-rich ground”.

Oil tumbled to a five-week low on Monday as last week’s parade of negative news, notably the US jobless rate hitting its highest level in 26 years, continued to eat away investor enthusiasm for commodities.

Data last week showing Eurozone unemployment rose to a ten year high further undermined the idea of a swift global economic recovery, with confidence in the market also knocked by the revelation that the large spike in oil seen last Tuesday was the work of unauthorised positions taken by a trader at the brokerage PVM.

Nymex August West Texas Intermediate, the US benchmark oil futures contract, fell $2.72 to $64.01 per barrel, while ICE August Brent lest $1.71 to $63.90 a barrel.

WTI is now down 13.2 per cent from the eight month high reached last week in the wake of the PVM trades.

“A sharply lower equity market was undoubtedly the driver [for lower prices] and combined with the US dollar this is likely to continue to offer guidance for the energy complex,” said Marius Paun of ODL.

“While the decline could have been exacerbated by the pre–holiday position squaring it seems that the balance is slowly starting to shift with bears getting stronger again.”

Read the full commodities report

Kate Mackenzie

Risk tolerance is a strong currency in foreign oil acquisitions, but China does not have a monopoly on it.

CNPC wants to buy a stake in Repsol’s Argentinian business YPF, and fellow Chinese company CNOOC is interested in a joint venture with Repsol. But the Spanish company, which has been wanting to offload some of its exposure to the turbulent Argentinian market, apparently has other suitors:

MADRID, July 6 (Reuters) – India’s Oil and Natural Gas Corporation (ONGC.BO) and Russian companies are among those interested in buying a stake in Repsol’s (REP.MC) Argentine unit YPF, a Spanish business newspaper reported on Monday.

Repsol has told several oil firms it is prepared to sell at least 20 percent of YPF and could dispose of more, La Gaceta reported, citing unnamed sources.

No mention of who those Russian interests might be, but we wonder how Argentina will view these approaches. It is after all keen to return as much as possible of YPF, which was sold to Repsol in 1999 in a spate of privatisation, to local hands.

Related links:

Indian, Russian firms eye Repsol’s YPF – report (Reuters, 06/07/09)
What future for Repsol, if YPF is sold?
(FT Energy Source, 03/07/09)

James Fontanella-Khan

Nigeria militants attack Shell
Third attack since president’s amnesty offer (Reuters via FT)

Lex: China and Latin America
China’s oil links to the region are deepening fast (FT)

Jailed tycoon in courts plea to US president
Obama to visit Moscow while Khodorkovsky will face hearings (FT)

Argentine oil tycoon targets Sterling Energy
Carlos Bulgheroni is behind a bid for London-listed oil company (Reuters)

Tony Blair outlines seven policies to stave off climate change
Focus on reducing deforestation, improving energy efficiency and renewable power (Bloomberg)

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