BP has been making some interesting points about the outlook for the natural gas market, most recently in a very thoughtful article in Foreign Affairs (requires subscription) by Christof Rühl, the company’s chief economist. It is a theme that BP is likely to highlight in its strategy presentation to investors on Tuesday.
It looks pretty clear that the key trends in the gas market – strong US production of “unconventional” gas, and the shift from long-term contracts to spot market sales – are bad news for Gazprom. Alexander Medvedev, the head of Gazprom’s international business, told the FT last week that the the basis of the company’s business in long-term oil-linked contracts remained unchanged, in spite of a shift to spot market pricing for between 10 and 15 per cent of the volumes sold to European customers.
What has perhaps been less widely appreciated is that, for all the enthusiasm of BP CEO Tony Hayward, the changing nature of the global gas market could also be bad news for BP and other international oil companies.
By Izabella Kaminska
Chinese coal prices.
We don’t know too much about them, but we understand it’s probably a good time to learn. As Bloomberg reported on Monday:
March 1 (Bloomberg) — Coal prices at Qinhuangdao, a benchmark in China, fell for a fourth week as winter demand and port closures last week increased stockpiles.
Prices for coal with an energy value of 5,500 kilocalories per kilogram dropped to between 700 yuan ($103) and 710 yuan a metric ton today, down 2.8 percent from a week earlier, data from the China Coal Transport & Distribution Association showed.
China has emerged from its coldest winter in at least 50 years, where snowstorms and sea ice in the three months through January had disrupted coal deliveries amid a surge in heating demand. Qinhuangdao coal prices increased 42 percent as of end- January compared with six months earlier.
And here’s the turnaround in chart form:
On FT Energy Source:
- The EU’s biomass/biofuels dilemma makes corn ethanol look easy
- Oil majors and the wrong kinds of risks
- Last word on Bloom. We promise
- Shell’s divestitures and carbon leakage in Energy headlines
- Another editorial calling for US nat gas expansion
- The other strategic petroleum reserves
- Signs of change in climate science
- The Bush alumni and TXU
- Q&A with ‘ARPA-E’ director
- Carribbean seeks energy indepenence through nat gas
- Cape wind site: not so sacred after all?
- Dow Chemical, trying to have it both ways on climate
Bernstein Research’s Neil McMahon has been critical of the reluctance of integrated oil companies to spend on exploration for some time now. It’s not easy to see a pattern in recent years; where were the majors when the west African offshore reserves, which now look like they could be very significant indeed, were discovered?
Ahead of all the IOC’s strategic update meetings being held this month (BP is first off the blocks on Tuesday), McMahon and team have published a fairly direct call for this aversion to exploration to be reconsidered.
If you’re not utterly bored with the Bloom Energy story already, read Chris Nelder’s take on it, which among other things points out that the potential of the technology, while interesting, is not especially unique and is far from promising a revolutionary clean, fossil fuel-free future:
The main effect of the device would be to transfer some of the power generation load off centralized coal plants and onto distributed natural gas plants.
Few customers — and probably only commercial and industrial ones, at that — will have the option of running it on biogas or landfill gas. For the slightly more than half of the homes in the U.S. that even have a natural gas line, it won’t make economic sense.
Nelder is familiar with both tech and energy industries and makes a similar point to the one we made last week: Silicon Valley doesn’t really understand the scale of the energy challenge:
The heavily-subsidised US corn ethanol targets have been roundly criticised in the past year for the fuel’s lifecycle GHG emissions. Several reports show them comparing poorly to fossil fuels, and use of corn ethanol is effectively restricted under new Californian fuel efficiency standards.
Meanwhile the European Union, which puts considerable amounts of money into meeting 2020 biofuel and biomass targets, is also continuing to weather heavy criticism of its sustainability criteria – or lack thereof – for the sources.
The Times claims to have viewed another report damning the sustainability of liquid biofuels being sourced by EU countries. A UK government study, it reports, found that meeting the country’s transport fuel goals, “will result in millions of acres of forest being logged or burnt down and converted to plantations.”