Daily Archives: July 13, 2009

Kate Mackenzie

The CBI, the UK’s main business group, has called for a number of changes to energy policy. Efficiency, grid investment, faster planning processes and support for low-carbon investment are all on the list. But it’s their calls for reduction in expected wind power growth that have gained the most attention. The report, which uses modelling from McKinsey, draws a ‘business as usual’ scenario, in which wind accounts for 24 per cent of the generation mix, and a ‘balanced’ scenario where it makes up 20 per cent. (Click the image below to view details of the scenarios). 

The primary argument is that the government’s slow and inadequate support for CCS and nuclear means the UK will spend more than is necessary to reach its targets, and end up with expensive energy supplies and difficulty meeting its later goals for 2030 and 2050.

How does wind figure in this?

Kate Mackenzie

Opec may have problems on its hands as compliance levels fall – right when crude oil prices are falling, too.

Compliance levels with the combined 4.2m b/d reduction agreed by the cartel late last year reached as high as 85 per cent – an unusually high level – earlier this year. It began to decline again, as some members took advantage of higher prices. Oil prices of course continued their rise for much of the past few months. But with the decline of the past week, those falling compliance levels might become more of a problem.

From Platts’ The Barrel:

OPEC’s leakage coincided with the broadly upward trend in oil prices that began in mid-February. OPEC’s crude basket stood at $35.58/barrel at the end of last year. By June 11 this year, it had risen to $70.87/b, the highest level so far in 2009.

But prices have since fallen back and the basket stood at $60.58/b on July 9, representing a drop of more than $10/b over the past four weeks. Which begs the question: Will lower prices — assuming they last — spark a renewed effort within OPEC to rein in production?

The cartel is not scheduled to meet again until September, and new decisions take a while to take hold in any case. It could be an interesting couple of months for some members.

Related links:

Opec: Is the cartel’s discipline crumbling? (FT Energy Source, 14/05/09)
Despite Opec’s compliance push, laggards are holding firm (FT Energy Source, 13/03/09)

Ed Crooks

The signing in Ankara today of the inter-governmental agreement for Nabucco, the proposed gas pipeline from the Caspian to the EU, is a historic moment, but only the first step in its journey from the drawing-board to reality.

With the five transit countries on the 3,300km route – Turkey, Bulgaria, Romania, Hungary and Austria – finally in agreement, the pipeline consortium can begin signing up gas trading companies for contracts to use Nabucco’s capacity, and complete its detailed design and engineering work to submit for environmental approvals.

The biggest question over Nabucco is whether the gas can be found to fill it. There are huge gas reserves around the Caspian region, but for one reason or another those sources are difficult to tap.

The key for Nabucco is the Field of Dreams principle: “if you build it, the gas will come”.

Kate Mackenzie

On Energy Source:

What’s really moving the energy markets

The next challenge for that €400bn solar desert project

Markets: Oil steadies as commodities consolidate

From Formula One to… hybrids

New ways to tackle the fraught questions of carbon emissions

Speculator crackdown: Who will say what?

G8 critics miss the point
Further reading:

IOCs say changes to Nigeria’s energy sector tax system will reduce their capital investment by half (Mail & Guardian)

Some lawmakers just keep talking about merging the CFTC with the SEC (DealBook/NY Times)

How pipelines and energy infrastructure are increasingly coming under attack (The National)

Russian plans for a floating nuclear plant, shaped like a ship, by 2012. What could possibly go wrong? (Yale 360)

Ivory coast poison claimants win first skirmish in Trafigura lawsuit (Guardian)

Chart of the week: Crude oil and volatility (SeekingAlpha)

Is a little nuclear pork worth a few GOP votes? (TNR)

Images of wave and tidal power projects (NewScientist)

Honduras is apparently coping coping with the PDVSA embargo (Platts)

Oil prices steadied on Monday after a sharp fall in the previous week while base metals were mixed and gold consolidated above the $900 an ounce level as commodity markets made a cautious start to trading, awaiting fresh impetus.

Last week saw equity, commodity and emerging markets all retreat as investors continued to question the sustainability of global economic recovery, ensuring risk appetite remained subdued.

Nymex August West Texas Intermediate dipped 9 cents to $59.80 a barrel while ICE August Brent added 14 cents at $60.66 a barrel, down 7.7 per cent this week.

Kate Mackenzie

Can you spare a few euros for Desertec?

At an estimated cost of €400bn, you might think the first challenge for the ambitious plan to cover much of the Sahara with solar thermal plants and wind farms to power Europe would be raising the money.

Some impressive German names are among those forming a company to explore the further challenges of the task: Siemens, Eon, Munich Re, Deutsche Bank, and RWE are all members of an industrial initiative launched today. Some of them are quite optimistic about the prospects: Siemen’s chief executive Wolfgang Dehen says the plans, which rely on solar thermal concentrating plants and high-voltage cables, are ‘technically feasible for the first time’ after being talked about for 30 years.

Kate Mackenzie

There might be little of environmental merit in Formula One racing. But when Honda pulled out of the race last year, where did its engineers go? To hybrid development, apparently.

The company’s new chief executive Takanobu Ito, who started last week, was all about hybrids in his first public appearance today. “I think everyone is going to go the way of hybrids,” he said, adding that Honda would speed up the development of a new hybrid system with two electric motors for medium to large vehicles.


Virtually all engineers that had been part of Honda’s Formula One team
are now working on hybrid development, he said.

Car companies do, after all, tend to justify their Formula One investments by saying it is useful to mainstream vehicle development.

Honda is upping the ante against its larger rival Toyota, which trail-blazed much of the mass market for hybrids with its Prius. Honda has sold more of its low-cost hybrid model, the Insight, than expected since it went on sale in February.

Related links:

New Honda CEO wants to accelerate hybrids (Reuters, 13/07/09)

By Izabella Kaminska

Supply? Bleh.

Demand? Bleh.

Geopolitical risk? Bleh.

Speculators? Sort of.

Fear of over-regulation? Yup!

That, at least, is the observation of Jeff Korzenik at (in)efficient frontiers this week, a prominent market commenter in the US. And he has a point. The sudden turnaround in energy, and overall commodity markets for that matter, took many by surprise last week as it came just when energy fundamentals were actually looking more bullish. The descent, interestingly, also comes a year since crude’s last epic turnaround from historic highs of $147 per barrel on July 11th 2008.

James Fontanella-Khan

China and Russia lead oil deals
Emerging economy buyers paid for $24.2bn of the total $48bn value of oil gas deals (FT)

CBI urges shift to nuclear from wind power
Labour’s policy is weakening the country’s energy security, says CBI (FT)

Centrica bid for Venture snubbed
Two leading shareholders have rejected Friday’s hostile bid (FT)

Lex: Centrica / Venture
Observed from the sidelines, bid battles can give a flavour of the times (FT)

Iran seeks China investment to build refineries
The world’s No.5 crude exporter seeks to cut gasoline imports (Reuters)

Solar power plants planned for Sahara
Dozen companies are set to launch a renewable energy initiative today (FT)

Lex: US wind power
Investing in alternative energy is far from riskless (FT)

Nigerian rebels say fighters attack Lagos oil jetty
Armed attacks have cut more than 20 percent of the nation’s oil exports (Bloomberg)

US seeks to underpin oil supply from Africa
The US is increasingly reliant on oil from West Africa (FT)

PetroChina receives approval for plan to invest in Nippon Oil refinery
PetroChina is expanding its presence in overseas refining (WSJ)

Patent spat looms at climate change meeting
US against the big emerging economies (FT)

Australian green investment takes a knock
Legislative to the social changes are poised to drive a new era for the industry (FTfm)

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