Daily Archives: July 27, 2009

Kate Mackenzie

GLG, one of the world’s biggest hedge funds, is planning to seed an oil production company and list it on the London Stock Exchange.

From Reuters:

GLG, based in London but listing its own stock in New York, intends to seed a venture called Lothian, that will be floated on the London Stock Exchange in September and then acquire oil production assets worldwide. Lothian would begin with a market value of about $500 million, said the sources, who were not authorized to speak for attribution because the venture is still in the planning phases.

As the Reuters story notes, big banks such as Morgan Stanley and Goldman Sachs are active in physical oil, but this tends to be accomplished through taking stakes in or buying existing companies.

Kate Mackenzie

Despite its efforts to cut spending and postpone projects under a weight of debt, Russian gas giant Gazprom has managed to make some significant overseas partnerships in recent months. It plans to assess gas reserves in Venezuela and last month announced it would invest $2.5bn in the  Nigaz joint venture with Nigeria’s national oil company. Both raised concern in the west – the Nigerian deal with Europe, which has traditionally been the main source of foreign investment in Nigeria, and the Venezuelan agreement with the US government.

Suspicion of a Gazprom quest for world domination has been heightened over the past few years, particularly since Gazprom turned off supplies to Ukraine in the 2005/06 winter and reduced supply in early 2008 and again then, this year.

This prompted an pan-European approach  to securing non-Russian gas supplies with a sense of unity unprecedented on energy issues to announce support and funding for the Nabucco pipeline. Gazprom meanwhile is championing another pipeline, South Stream, in a move often seen as an attempt to thwart Nabucco.

But are these fears overblown?

Kate Mackenzie

Do oil sands plus peak demand spell doom for oil majors?

Markets: Brent crude hits $71

UNG goes OTC

An abundance of natural gas, well into winter

Further reading:

A summary of UNG for new readers (SeekingAlpha)

More arguing over forestry carbon credits (WSJ)

Iraq drops Siba gas field from second bidding round (Platts)

Has Nigerian oil revenue halved? (OilVoice)

Putting a new shine on diesel (Houston Chronicle)

£1bn of loans for wind power (Guardian)

Climate change on the table again in latest China-US talks (Cop15)

Book review: The Solar Century (New Scientist)

Chris Cook on commodities market manipulation (The Oil Drum)

Kate Mackenzie

Will the combination of a weak economy, increasingly scarce and expensive oil reserves and falling demand spell disaster for the world’s biggest oil companies in 2020?

Greenpeace advances this argument in a rather unconventional attack on unconventional oil published today. The campaign group argues that unconventional oil (particularly from tar sands, as the environmentalists call them) is too expensive for the world economy, and that this doesn’t bode well for the oil majors.

The paper says demand simply might not be there for oil at that price in another 10 years’ time – pointing to falling medium-term demand forecasts from international organisations and the US government and to China’s determination to control its own energy destiny.

It goes without saying that Greenpeace’s objective is to get investors in the likes of BP, Shell and Exxon – which all publish their second-quarter results this week – to wonder if the longer-term outlook for the companies is less rosy than their share prices would suggest.

But the argument brings together so many elements of the energy debate that have changed in the past six to nine months.

Commodity markets made a strong start to trading on Monday, extending last week’s gains with European crude prices pushing beyond the $70-a-barrel mark while base metals staged a broad advance, led by copper.

Further gains for stock markets and rising confidence about the outlook for US earnings helped to bolster risk appetite.

Crude oil prices rose with ICE September Brent up 60 cents to $70.92 a barrel after touching a session high of $71.28.

Nymex September West Texas Intermediate rose 53 cents to $68.58 a barrel.

Brent has traded at a premium to WTI recently because of weak US demand conditions.

Read the full commodities report

By Izabella Kaminska

Bloomberg reports the United States Natural Gas exchange traded-fund, which has been buying Nymex and ICE natural gas swaps since at least the beginning of June, has now been pushed into the world of OTC bilateral swaps.

As the agency writes:

July 24 (Bloomberg) — United States Natural Gas Fund, the world’s largest fund in the commodity, bought an off-market gas swap for the first time in a sign that it has outgrown the main markets for fuel futures and swaps.      The $4.4-billion fund purchased a $250 million bilateral swap that isn’t subject to the size limits imposed by the New York Mercantile Exchange, where the fund holds $480-million worth of natural gas futures and swaps.

This is hugely significant due to the nature of the OTC market, its liquidity and also its positioning out of regulatory reach. For an ETF like the UNG, this also generates important questions about transparency, and counterparty risk. In an OTC bilateral trade, no exchange-based liquidity pool can come to your rescue in the event of default.

James Fontanella-Khan

Brazil and Paraguay signs ‘historic’ power deal
‘We have achieved something that was impossible for 30 years,’ said Lula (FT)

Lex: Carbon allowances
UK energy users will soon have to join a scheme aimed at cutting consumption (FT)

Opinion: US and China must fight emissions together
John Kerry says US-China negotiations are an important test (FT)

Oil groups face up to lower prices
This week the west’s biggest oil companies will reveal how well they are coping with the squeeze (FT)

A mixed record so far on environmental issues
London pledged to stage the greenest games in history (FT)

Halliburton reveals Venezuela assets amid dispute
Oilfield services provider’s investment in the country is $265m (Reuters)

German wind-turbine exports to China set to shrink
Chinese government favours domestic products (Bloomberg)

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