Daily Archives: October 26, 2009

Sheila McNulty

A new study by Wood Mackenzie, the consultancy, confirms what others have warned about in recent months and takes it one step further: The carbon legislation being considered by Congress is more onerous than that in Europe and could threaten the sustainability of the US refining industry. Alan Gelder, Wood Mackenzie’s head of global downstream oil consulting, said, if passed into law, the legislation could cost US refiners US$100bn per year.

That is because they will be required to purchase carbon emission credits for both stationary emissions – from the refineries themselves – but also emissions from the subsequent combustion of the fuels. Gelder says the US draft legislation is much more onerous on the US refining sector than its European counterparts.

He explains that the free allocation of allowances for the US refining sector equates to less than 5 per cent of total carbon emissions from the production and consumption of transportation fuels in the US – or about 100m tons in 2015.  The inclusion of consumption emissions, combined with a lower free allocation of credits, will mean US refiners must purchase around 2bn credits in 2015. Given the carbon emissions reduction goals set by both the House and Senate climate bills, Gelder says carbon will have to be priced at $50 a ton, or even higher, in any final legislation.

Kate Mackenzie

The US Chamber of Commerce has not been making many friends lately with its views on climate change.

Last week it was the subject of a spoof press release and press conference , in which a group of pranksters/activists declared the Chamber had reversed its long-held position on climate change and called for a carbon tax (apparently the Chamber has since made sure the press release was taken offline).

They’re not popular with the White House.

Then there was the spat over its membership numbers: 3m or 300,000? And if indeed it is the smaller number (direct membership, rather than membership of member organisations, is in fact about 360,000), who was to blame for getting it wrong all those years?  The question was first raised on Mother Jones, but Colombia Journalism Review, for one, is rather critical of the Chamber on the issue.

Kate Mackenzie

Enthusiasm for betting on a fall in the share price of some of the world’s biggest solar companies is high, according to Data Explorer.

They say that almost 16 per cent of outstanding shares in First Solar, which last week joined the S&P 500, are available for loan as of October 23. That was more than a third higher than a week earlier, when it was 11 per cent.

While gauging just what different levels of short interest indicate is an inexact science, 16 per cent is considered a rather big number.

VW provides a good example – several hedge funds had their fingers burnt after the car maker’s share price soared. These funds had been betting on just the opposite – short interest in VW peaked at  16.39 per cent in September 2008.

Data Explorer also notes that 4.3 per cent – still a relatively high number – of shares in GT Solar were available for loan last Friday, and utilisation rate for that stock was close to 100 per cent.

Shorting, however, as others have learned, can be a risky business.

Related links:

Shorting the rally (FT Alphaville, 14/09/09)

Kate Mackenzie

On FT Energy Source:

The elusive truce over Nigeria’s oil production

Carbon market growth slows, but not for long

Markets: Oil dips

Is taxing pollution a winner after all?

Teaming up with China on clean tech

Boxer-Kerry giveaways and Q3 oil results in Spot News

Further reading:

A post-oil world gets less sci-fi by the day (Guardian)

Making solar sexy (NY Times)

US Chamber of Commerce gets the fake climate press release removed (Wired)

White House confronts the US Chamber of Commerce (LA Times)

Climate day protests around the world (AFP/Grist)

Some countries offer more clean tech investment certainty than others (WSJ Environmental Capital)

Iraqi television gets all black humour about oil (Guardian)

Kate Mackenzie

Remember that European carousel fraud was discovered in carbon credits? It’s actually made a big hit on the global carbon markets in Q3.

New Energy Finance finds the value of the carbon market fell 21 per cent in the third quarter, but this was primarily because of carousel fraud (in which buyers are charged for value-added tax, but the seller then absconds with the tax rather than handing it over to the relevant government).

This fall was mostly linked to Bluenext, a large exchange based in France:

The main cause of this reduction in market share compared to Q2 was the identification of a VAT carousel fraud – primarily linked to Bluenext, the French based exchange which had carried the majority of the EUA spot market.

Between April and May 2009 traded spot EUA volumes increased by 39% on Bluenext. At its peak daily traded volumes hit 19.2 million spot contracts on 2 June, relative to a daily average of 2.2 million transactions for the rest of the month.

Following identification of the fraud, French authorities took action on 8 June to exempt both EUAs and CERs from the 19.6% VAT. Trading volumes subsequently fell off, and June trading figures were down 133% on May.

Regardless of this blip, the entire year is forecast to be up 3 per cent on 2008, to $122bn – although this is paltry growth compared to 2008, which almost doubled on the previous year. The culprit, of course, for this year’s lower growth is the recession.

In the longer term, NEF says, the carbon market is set to increase from $122bn by the end of this year to $1,900bn by 2020 – although this depends on the safe passage of legislation in the US, Japan and Australia that would significantly increase the scale of the international market in carbon credits.

Related links:
Does carbon need a floor price? (FT Energy Source, 19/03/09)
Carbon markets and the ‘cadre of Yale graduates’ (FT Energy Source, 25/02/09)

Tom Burgis

Crude from a recent spill slicks the creeks beside the settlements of the Edagberi clan in the Niger Delta. Villagers say their livelihood - long based on fishing - has been eroded by oil extraction. 

Crude from a recent spill slicks the creeks beside the settlements of the Edagberi clan in the Niger Delta. Villagers say their livelihood - long based on fishing - has been eroded by oil extraction. (Photo: Tom Burgis)

The main militant umbrella group in the Niger Delta has declared an indefinite ceasefire. Amid proposals of shifting a share of oil profits to the regiona and pledges to retain surrendered combatants, the rebels who have suppressed Nigerian oil production for years are waiting for the government to make good on its promise, writes Tom Burgis from the Niger Delta

On October 7, the Movement for the Emancipation of the Niger Delta, an umbrella organisation of the militant groups that have waged an insurgency against Nigeria’s oil industry for most of this decade, issued a statement denouncing a government amnesty that had convinced several top commanders and thousands of footsoldiers to surrender their arms.

“We will fight for our land with the last drop of our blood regardless of how many people the government of Nigeria and the oil companies are successful in bribing,” said the group, giving voice to a hardline faction that demanded full talks on how oil revenues are divided, above and beyond the amnesty.

Ten days ago came another statement declaring a resumption of hostilities against “the Nigerian oil industry, the Nigerian armed forces and its collaborators” following the end of Mend’s ceasefire.

Then, on Sunday, there was a dramatic change of tone. Declaring an “indefinite ceasefire” to allow for talks with the government, Mend, always fond of a biblical citation, wrote: “There is a time for everything, and a season for every activity under heaven … a time to tear and a time to mend.” (Ecclesiastes).

The announcement is a fillip to a government that is losing billions of dollars of revenue after years of attacks that have reduced the output of sub-Saharan Africa’s biggest energy sector by as much as 40 per cent.

Oil prices dipped on Monday after hitting their highest levels of the year last week but base metals rose and US agricultural commodities extended their recent gains as markets made a mixed start to the new trading week.

Nymex December West Texas Intermediate dipped 30 cents to $80.20 a barrel while ICE December Brent lost 18 cents at $78.74 a barrel.

US crude oil hit $82 a barrel last week, a high for 2009 and up 83.8 per cent since the start of the year, fuelling concerns that rising oil prices could hinder global economic recovery.

“A spike in oil prices above $100 a barrel could create significant headwinds for the global economy,” said Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch.

Mr Blanch said the combination of surging money supply, a rapidly weakening US dollar and a cyclical improvement in oil demand could push oil prices above $100 a barrel moving into 2011.

Read the full commodities report

Kate Mackenzie

President Obama’s speech on Friday at MIT, which some hoped would urge Congress to move ahead with climate change legislation, instead focused largely on green jobs and economic stimulus.

And indeed, with last week’s Pew survey showing levels of belief in the seriousness of climate change have fallen pretty sharply in the past 18 months, and that cap and trade seems to barely register on the public psyche right now, why would he want to talk about all that?

Interestingly, however the Pew survey found that a majority of Americans believe the US should sign up to an international agreement on climate change, and half of those polled believed emissions should be restricted, even if it made energy bills go up.

It’s enough to make us wonder whether cap and trade has been tainted by association with nasty financial instruments, the somewhat-maligned ‘giveaways to polluters’, or simply by its own complexity.

Kate Mackenzie

Amid all the worry in the US about China winning the clean tech race, Duke Energy seems to be unusually pro-active about teaming up with Chinese energy companies (or at least, about publicising it).

Anyhow, Duke has announced another China deal, this time with ENN Group. According to the press release, the two will team up to “to develop, own and operate the solar projects” in the US. They will focus on utility-scale solar farms and commercial distributed solar projects; both will be photo-voltaic.

But what does it mean to collaborate with China? This latest announcement, although lacking in numbers, advances an announcement back in September at the Clinton Global Initiative that Duke and ENN signed an agreement that specifically mentioned solar developments. But it also alluded to sharing technology.

Kate Mackenzie

Nigerian militan group calls ceasefire (FT)
Broader efforts required to maintain peace, warn activists

Senate Democrats set climate industry permits (Reuters)
Free allowances similar to proposed Waxman-Markey legislation

European firms fall short in Gazprom purchases (WSJ)
‘Take-or-pay’ shortfalls of ‘great concern’ to Russian company

Woodside’s Pluto LNG expansion costs may soar (Bloomberg)
Key supplier switches to Chevron’s Gorgon project, says JP Morgan

German solar industry may dodge big subsidy cuts (Bloomberg)
Coalition sending ‘clear positive signal’, says industry

Ghana in talks with other oil companies over Jubilee (FT)
BP, Total and CNOOC in the frame amid doubts over Kosmos-Exxon sale

Focus falls on possible Exxon prey (FT)
Investors will be looking for acquisition news at Q3 results on Thursday

Goldman keeps $85 target on ‘robust’ China diesel demand (Bloomberg)
‘China oil demand is leading the way’

Double UK nuclear use, urges EDF chief (FT)
30% nuclear by 2030 is vital, says De Rivaz

EPA commits to air pollution rules by 2011 (LA Times)
Oil- and coal-fired plants would be forced to reduce mercury emissions

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