Daily Archives: August 11, 2009

Kate Mackenzie

Energy efficiency is the unloved child of the clean tech industry. Not only is it more connected to the construction industry and to government standards, but the difficulty of aligning investment incentives has long overshadowed the massive savings that can be made from efficiency measures.

Meanwhile, the somewhat disorganised US natural gas industry has been lamenting its lack of presence so far in negotiations over the Waxman-Markey bill, while coal grabs all the compensatory goodies.

But both – natural gas in particular – seem to be doing rather well at the Clean Energy 2.0 Summit this week in Las Vegas.

Kate Mackenzie

BP is partnering with US firm Martek to develop a scalable way to produce biodiesel from sugar, using algae.

From Reuters:

NEW YORK, Aug 11 (Reuters) – BP Plc (BP.L) and Martek Biosciences Corp (MATK.O) said on Tuesday they will form a partnership to study the use of algae to convert sugar into biodiesel.

London-based BP will contribute $10 million to the project, which will study ways to use Martek’s proprietary algae to create the fuel.

Martek will conduct the research and development, and BP will help find applications, the companies said in a joint statement.

Tempting as it is to say this move, coming after Exxon’s algae investment, signals a turning point for algae-based fuel, BP’s investment is very tiny – the press release specifies “up to $10m”, which is only a fraction of the £56m it committed to its ill-fated jatropha venture with D1 Oils. And it’s small change compared to BP’s overall spending.

BP’s overall investment in alternatives, after hitting a peak of $1.4bn last year, will fall to just $500m-$1bn this year – and its overall capital investment will be about $20bn. As my colleague Ed Crooks pointed out last month, it has had to pull back from the runaway success of its ‘Beyond Petroleum’ slogan.

Meanwhile Exxon committed a minimum of $300m, and possibly more than double that amount, to an algal oil project with Synthetic Genomics.

Related links:

Back to petroleum (FT 07/07/09)
BP’s jatropha venture: In case you were wondering (FT Energy Source, 17/07/09)

Kate Mackenzie

On FT Energy Source:

The tar sands pipeline and Obama’s carbon commitments

Betting on Brent

What’s driving crude markets: Jon Rigby of UBS

China’s energy landscape: Room enough for everyone?

Natural gas fighting difficult battle in Washington

Markets: Muted reaction to Chinese import data

Where the nuclear reactors are

The mystery of China’s disappearing mega oil-bid

UK and US oil in June


Further reading:

US refiners bought stolen Mexican oil (AP)

Coal’s future wagered on carbon capture (Washington Post)

Excitement over export potential as Gorgon project nears approval (The Australian)

Wind power begins to reduce power costs in Texas (Yale 360)

Tesla turns a profit in July after all (Greehsheet)

GE signs $115m service agreement in China (OilVoice)

An amusing review of ‘$20 a gallon’ (Infrastructurist)

GM’s ’230′ viral campaign could be about the Volt’s MPG. But how would it get to that number?(Bloomberg, Greencarreport)

Russia-Ukraine tensions rise, again (UpstreamOnline)

Kate Mackenzie

The UK’s net oil exports fell in June, throwing the country’s deficit in its balance of trade in goods from £6.2bn in May to £6.5bn in June. Oil trade showed a deficit of $315m, the Office of National Statistics said, compared to a surplus of £100m in May.

By comparison:

Exports of traded goods excluding oil rose by 1.4 per cent month-on-month in June, raising hopes that the competitive pound will help the UK benefit from the gradual improvement in activity in major overseas markets.

The oil deficit swings wildly: it recorded a $500m deficit in March, but less than $100m in February. This latest figure is put down to summer maintenance on UK drilling installations. In other words, a temporary blip, although the long-term trend for UK oil production is not so hopeful – the number of exploration wells is forecast to drop between 41 and 66 per cent this year, and the industry fears that half of the infrastructure could be decommissioned within 11 years.

Most commodity markets made modest gains in cautious summer trading on Tuesday, while sugar prices consolidated after very strong gains in the previous session.

Nymex September West Texas Intermediate rose 10 cents lower at $70.70 a barrel and ICE September Brent gained 14 cents at $73.64 a barrel.

Traders expressed surprise at the lack of market reaction to strong data from China which showed crude oil imports at 4.62m barrel per day in July, a monthly record and up 42 per cent compared with the same period last year.

Sheila McNulty

The Obama Administration has made a big show about its desire to cut greenhouse gas emissions.

But actions speak louder than words.

Environmentalists want to see the Administration underline its commitment to reduce carbon by rejecting a permit for a pipeline carrying fuel for Canada’s carbon-intensive oil sands into the US.

Amy Myers Jaffe, energy expert at Rice University, cautions that such a message would be better delivered in  bilateral talks. Certainly that would be the more diplomatic course, and most likely the way the Obama Administration will go.

But rejecting the permit request by Enbridge Energy would no doubt underline the administration’s committment to moving toward a green economy. Indeed, Susan Casey-Lefkowitz, an attorney at the Natural Resources Defense Council, an advocacy group, says this is a test of whether the Obama Administration is going to have a consistent message.

That is certainly true. But Canada counters that it is working to reduce the greenhouse gas content of oil sands production.

By Izabella Kaminska

The contango is widening, floating storage is on the increase, and Brent’s premium to WTI is intensifying by the day (note chart below) — which means only one thing: stocks at Cushing, the physical delivery point for the WTI  Nymex contract, must be reaching a critical level (again).

WTI/Brent spread - FT

Harry Tchilinguirian, commodities analyst at BNP Paribas, wonders if the above means the market should now expect a return of the extreme pricing relations of Q1′ 09 — when WTI’s relevance as a benchmark began to be questioned due to the extreme disparities that appeared between it and Brent crude prices.

Kate Mackenzie

Jonathan Rigby of UBS answered FT.com readers’ questions on where oil prices are going, and what is driving the markets. The full Q&A is here and we’ve picked out a few highlights.

Rigby believes that last year’s price run-up towards $150 a barrel had many causes, including speculation but also a steep rise in oil production costs. He says the recent rise in front-month prices is not justified by fundamentals, although the back-end is driven by the market’s view of longer term fundamentals. No single oil company, he says, is able to manipulate oil prices although some participants with access to storage have been able to profit from contango. Rigby is also sceptical about the importance of ETFs in driving the recent price rise, pointing out their holdings have fallen since February.

There is a price at which long-term supply and demand balance. I think this time last year we were well above it. As is the way with markets, especially ones that have to incorporate the long and short term, we had hugely undershot at the start of this year. Much of the rally this year has been to correct that undershoot but it needed liquidity to return to the market and Opec actions to begin to work. The recent rally is most certainly not demand driven.

By Gwen Robinson

There’s obviously a lot of damage-control going on in China, and possibly in Argentina and Spain, following a report on Tuesday – and a denial – of talks over what could rank as the energy deal of the year, and one of China’s biggest overseas investments.

The mystery – apart from whether the talks are on or off – is why Chinese companies would want to pay $17bn for less than premium upstream and downstream oil resources?

Dow Jones Newswires, in a story run by the Wall Street Journal, reported on Monday that China National Petroleum Corp and Cnooc proposed jointly paying at least $17bn for all of Repsol YPF SA’s 84 per cent stake in Argentine oil company YPF.

Dynegy sells $1bn in power assets
Sale will allow Dynegy to service its near-term debt (FT)

Eon nears €3bn Thüga sale
Thüga’s local units generated €16.4bn revenues in 2008 (FT)

Shell reviews options on Stanlow refinery and may sell plant
Europe’s largest oil company tries to cut spending (Bloomberg)

US says refineries bought oil smuggled from Mexico
American oil executive pleads guilty to conspiracy (NYT)

Lex: US power plants
Extraordinary boom-bust cycle for US power market (FT)

New Earth in £15m issue for growth
Company spurred by increasing demand to get energy from waste (FT)

IBIA assesses plans to curb bunker fuel emissions
Measure considered to curb greenhouse gas emissions (Argus)

Quorum Oil to launch $50m fundraising
Company has several exclusive deals lined up (FT)

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