Daily Archives: February 1, 2010

Sheila McNulty

President Barack Obama’s 2011 energy budget, which was announced today, looks a little short sighted, despite all the talk about seeing through to the clean energy future. The problem is that it calls for the elimination of more than $2.7bn in tax subsidies for oil, coal and gas industries. This step, the government boasts, is estimated to generate more than $38.8bn in revenue for the federal government over the course of the next 10 years.

Hmm. So the US government is going to get more money from the fossil fuel industry on which the country remains dependent. And the hope is that it will do more to encourage growth in areas such as wind, solar and geothermal. While there is clearly an important role for start-ups and pure-play companies, the chances of getting truly scalable clean energy would be boosted by partnership with the fossil fuel industry.

Carola Hoyos

The Opec oil cartel is hardly known for its nimble decision making. Its country members are so entrenched in their ways that they still use a long-out-of-date set of production capacity numbers to decide how the group’s quota is divided among its members. But that may be about to change.

Kate Mackenzie

A weekend New York Times story makes the bold assertion that China is leading the “race” in renewable energy.

The key reason given is that China is the world’s biggest solar panel and wind turbine manufacturer. Its own domestic market is also huge: massive infrastructure projects and big incentives for renewable power are stimulating demand. Also helping is the rapid growth in overall energy demand, together with policies, such as a plan to double the proportion of power coming from renewable sources to 8 per cent by 2020. Meanwhile cheap labour and cheap finance are relatively abundant.

Sheila McNulty

When the US independents (oil and gas producers without refining operations) began growing US natural gas production, nobody thought they would flood the market. But in recent years, new technology and expertise has grown production to the extent that the industry has worried in recent months that there would be no more room to store it in the US. Indeed, companies have started to contemplate exporting natural gas from the US.

This is an about-face from expectations of even a few years ago. In 2003, Alan Greenspan, then chairman of the Federal Reserve, noted the alarming rise in natural gas prices in the face of growing US demand and decreasing access to US supplies. That led to a concerted drive to build LNG facilities. In 2006, Wood Mackenzie, the energy consultancy, predicted North America would be the world’s biggest importer of liquefied natural gas (LNG) by 2010.

But that is not the way it turned out.

Kate Mackenzie

On FT Energy Source:

- Exxon’s XTO exit clause seems unlikely to be used

- The UK/US nat gas divergence

- Floating storage stocks down in January

- Plenty of room to move in the next round of climate negotiations

- Shell/Nigerian woes in Energy headlines

Further reading:

- Back to oil for the US integrateds

- Major offshore start-ups to watch in 2010

- Obama may do even more for atomic energy than his predecessor

- Do you use more energy than your neighbours?

- Hype and hope of MacRoRan’s Davy Jones gas find

- Oil and gas industries – just to name a few – benefited immeasurably from state spending

- Europe’s green energy supergrid

- Seoul’s path to nuclear power

- Panama to reduce US oil consumption?

Sheila McNulty

ExxonMobil managed to beat estimates with its fourth-quarter earnings 23 per cent lower, year-on-year. But analysts on the company’s conference call will be pressing the oil major’s executives on the viability of its decision to buy XTO Energy, the natural gas producer. The $41bn deal came with an exit clause allowing it to walk away if the key technology used in tapping unconventional natural gas becomes uncommercial.

That technology is what has enabled the boom in the US onshore gas play in recent years, growing estimates of US resources from 30 years supply, at current usage rates, to 100 years supply. The process involves drilling down, up to 20,000 feet, and then up to 4,500 feet across, accessing a much broader area than conventional oil and gas development, with ultimately less effort, environmental impact and expense.

See that? That’s the rather spectacular divergence between UK NBP gas prices and US Henry Hub prices of late.

According to Goldman Sachs it’s all weather related. In fact, the banks’ analysts put it down to thawing cold weather in the US and the re-emergence of the dreaded cold snap in Britain.

Kate Mackenzie

JBC Energy has a great chart today of their estimates of January’s floating storage:

JBC Energy

Source: JBC Energy

They add that despite the drawdown, “even if the rest of the winter turns out to be very cold, we expect the distillate glut onshore and offshore not be consigned to history until at least late 2010″.

Related links:

US petroleum stocks: Fit for bursting (FT Alphaville)

Kate Mackenzie

Most of the world’s big economies did sign up to the emissions targets under the loose Copenhagen accord by yesterday’s deadline – but the mood surrounding this progress is fairly subdued.

The news that most of the world’s big emitters did meet the soft deadline set by the IPCC is hardly enough to detract from the poor publicity surrounding the organisation since the Himalayan glaciers error was revealed. For one thing, the biggest emerging economies had already indicated they would commit to the accord they essentially brokered.

Kate Mackenzie

Big nations set out emissions cut targets (FT)

Nigeria attack forces Shell to cut output (Reuters)

Chevron’s net income drops 37% (FT)

Shell to sell oil licences in Nigeria (FT)

RBS Sempra sale hits snag (FT)

Exxon in spotlight over XTO (FT)

Japan to focus on green technology (FT)

Former BHP Billiton chief joins BP board (FT)

IMF working on plans for ‘green fund’ (Reuters)

Baghdad signs final deals for biggest oilfields (The National)

Xstrata plans $A6bn coal power-station coal mine in Australia (Bloomberg)

India starts partial privatisations with power sale (FT)

Iran denounces US Senate’s approval of gasoline sanctions (Oil & Gas Journal)

China leading global race to make clean energy (NY Times)

Obama hints at increasing US nuclear capacity (Argus)

Golar LNG and Thailand PTTEP scrap floating LNG plans (Bloomberg)

Payment change to boost UK solar power (FT)

Indonesian environmental rules threaten coal output (Argus)

Petrofac to spin off North Sea assets (FT)

Spanish power demand rises for first time since 2008 (Argus)

UK Coal losses hit £115m (FT)

Obama sets GHG target for federal agencies (Argus)

Baker Hughes: US oil, gas rig count up 35 (Dow Jones)

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