In the past year, a growing number of foreign energy companies have bought into the US natural gas scene through joint venture deals with independents to gain access to what is turning out to be a huge new fuel source.
Analysts estimate that the independents have grown US supplies, using new technology and expertise, to 100 years worth of natural gas, up from about estimates of about 30, just three years ago. Yet it is interesting to note the US majors have been left out of this joint-venture activity, continuing to focus on the deep-water Gulf of Mexico and, mostly, overseas.
ConocoPhillips’ revelation in recent days that it is moving to take over the 50 per cent stake held by Petroleos de Venezuela, Venezuela’s state oil company, in a joint venture processing crude at a Texas refinery because PDVSA has defaulted on supply contracts underlines the value of the US gas play. Had PDVSA been American, this dispute would have been settled a long time ago. And the chances of the US nationalising assets is slim to none.
By Izabella Kaminska
Natural gas took on a sudden life of its own on Monday, shooting up more than 11 per cent in London afternoon trade:
Here’s how that move looks over a longer duration:
On FT Energy Source:
Will carbon credit scandals soon be behind us?
Natural gas comeback not quite what it seems
Australia vs Qatar on LNG and… CO2 emissions
Markets: Commodities slip as dollar recovers
Goldman finds more reasons to be cheerful
Russia – and only Russia – has allowed non-OPEC countries to have a five-year supply plateau (Gregor)
New state legislation to support retrofitting of existing buildings for efficiency (NY Times)
How to short-circuit the US power grid, should you want to (New Scientist)
UAE nuclear reactor contract delayed (The National)
Remember those claims that higher ethanol blends get more fuel efficiency? Robert Rapier does (R-squared)
A lightbulb that shines for 19 years (CNet)
Schwarzenegger may order a change in California’s green energy rules (LA Times)
BP, Shell exiting downstream Zimbabwe (Argus)
Solar panels made from human hair? Um, maybe not… (Daily Mail, Christian Science Monitor, Infrastructurist)
Goldman Sachs’ energy analysts are finding a lot of reasons to be cheerful about oil prices lately. Remember the IEA’s relatively bullish report oil demand last week, where it revised demand forecasts upwards by 500,000 barrels per day in 2009 and 2010? This was partly due to signs that destocking of crude oil and products, particularly in Asia but also in the US, was stimulating demand for fresh supplies.
However the IEA was cautious, noting that there was a lack of data from China, particularly around inventories, complicated the outlook.
Goldman Sachs however, is (unsurprisingly) much more bullish on the subject of destocking of existing inventories in a note published today.
Another big verifier of carbon offsets has been suspended by the United Nations.
SGS UK, which audits clean energy projects under the carbon development mechanism (CDM) – developed under the Kyoto Protocol – has been banned from assessing the international projects, according to The Times. Another big auditor, Norway’s DNV, was suspended in late November and reinstated in February.
The Times says this will raise questions about the system whereby countries can buy credits from carbon reduction projects in the developing world to more cheaply meet their own emissions reduction targets. But it’s already widely agreed that there are problems with the CDM, and reform of the system is one of the key points up for discussion at Copenhagen in December.
What comes in for criticism most often with all offsetting – whether voluntary or UN-approved – is additionality: proving that the projects do actually result from the CDM money, and wouldn’t have been carried out anyway.
In energy markets, crude oil prices extended their retreat after a sharp fall in Friday’s session. Nymex October West Texas Intermediate oil fell 83 cents at $69.46 a barrel while ICE October Brent lost 50 cents at $60.19.
Analysts at Goldman Sachs said increases in both Opec and non-Opec oil production would be limited and the global oil market would shift into a deficit, pushing petroleum inventories in developed markets lower and oil prices higher.
Goldman reiterated its forecast for oil prices to reach $85 a barrel by the end of the year and crude would reach $95 a barrel by the end of 2010 as spare Opec production capacity became exhausted, non-Opec production declines worsened even as demand strengthened further.
“Mounting evidence of positive momentum in the OECD economies on top of still robust growth in emerging markets suggest that the dawn of renewed economic expansion is breaking,” said commodity strategist at Goldman Sachs: “We expect that this higher demand against limited production growth will push key commodities, such as oil and copper, into deficit, lending substantial support to prices and returns.”
Read the full commodities report
By Izabella Kaminska
Natural gas staged a small comeback last week, inciting some speculation within the blogosphere that a renewed bull market might be under way in the commodity. Evidence for this, say commenters, is the now heady height of the gas-to-oil ratio above the 20x mark.
Be that as it may, we would caution there are still some factors that investors should consider before rushing into in natural gas.
Could Australia have more in common with Qatar than just being a huge natural gas exporter?
With Chevron approving its investment in the massive Gorgon natural gas project in Western Australia, the country, with its estimated 40,000bn cubic feet of gas, looks set to become a big player in LNG. ConocoPhilip’s chief executive last week was quoted saying it could be the world’s biggest LNG exporter in 20 years.
So how does Qatar, currently the world’s biggest LNG exporter, feel about that? Rather sanguine, reports the FT:
Abdullah bin Hamad Al Attiyah, Qatar’s energy minister and the head of its LNG operations, this month acknowledged the leap Australia’s gas industry was about to make as well as its regional superiority.
He told the Financial Times: “We cannot control the whole world. Why not welcome them to the club. The world will need Australia and it will need Qatar.”
However there might be another comparison between the two that won’t be particularly welcomed by either: who is the biggest (or one of the biggest) per capita greenhouse gas emitters.
Chevron approves $37bn Gorgon project
Base estimated at 40,000bn cubic feet of natural gas (FT)
Libya approves $9.86bn plan to boost oil output
Plan to develop and upgrade 24 oilfields (Bloomberg)
China ‘on course’ to meet emissions targets
Reports says China on track to meet ambitious targets (FT)
Diplomacy efforts fuel hope of a revival in Syrian oil
Syria’s location and unexplored geology make it a potentially profitable (WSJ)
Fear of new Europe gas crisis
Ukraine may be unable to pay its gas bills in winter (FT)
Recovery drives commodities ‘hiring boom,’ Lai says
Staff to benefit from surging metals and energy prices (Bloomberg)