Daily Archives: April 27, 2010

Sheila McNulty

The cost of last week’s rig accident, fire and eventual sinking in the Gulf of Mexico is continuing to rise. BP is responsible for the cleanup – a problem that, for now, at least, is continuing to grow. The UK oil company does not have insurance for oil spills, so will have to cover those costs itself. And it has yet to stem the leak.

Indeed, it became apparent today that it could take – in a worst case scenerio – several months to stop the leak. BP is attacking the problem on several fronts. The easiest and fastest is to activate the blow-out preventer, a system of valves designed to shut off an unexpected surge of oil or gas. If it can do that, the cleanup should be accomplished pretty quickly.

But, as a backup, BP already is bringing in two rigs to drill relief wells – a process that could take two to three months – to intersect the pipe and pump down a heavy fluid to stop the unrestrained flow. These rigs have to be taken away from work they were doing to drill other wells, which means a loss of time and money from those other operations. The process itself has its own costs, and it is time-consuming and delicate.

Kate Mackenzie

John Kerry may say it’s not over and Joe Leiberman is still fighting, but everyone else is pretty sure that the US won’t introduce a bill restricting greenhouse gas emissions this side of 2011 – and perhaps longer, if delays on the climate bill mean Republican Lindsey Graham walks away from the proposal for good.

Australia’s centre-left government, meanwhile, has shelved its planned emissions trading scheme ahead of an election due later this year, which could see the plan remain untouched for more than three years.

Ironically, both bills were stymied by political opportunism, as much as mere climate scepticism or opposition to carbon pricing.

Kate Mackenzie

Speculators may get a bad rap in the public’s eye, but those involved more closely with commodity markets will usually point out that speculators play a useful role: they provide liquidity and counterparty bets for those companies requiring long-term certainty over pricing.

Without the purely speculative parties, those real-world users of commodities would only be able to set prices with each other, which might not always be possible.

Most of the informed debate over the CFTC’s proposed position limits on energy speculators takes this as a given. But the physical energy users themselves believe there can be too much of a good thing.

Kate Mackenzie

As crude oil prices remain solidly above $80, the analysts at the Centre for Global Energy Studies are a little wary of Opec warning of a second-quarter decline in demand. The focus in markets, CGES notes, is on the demand side now, with China’s reported consumption soaring and a widespread belief that non-Opec supply has peaked. And they demonstrate that the second quarter is not usually a difficult one for Opec:

CGES chart of Opec quarterly revenues and prices

Kate Mackenzie

Last week the talk was of Russia settling some of the long-running tensions between the two post-Soviet countries by offering a 30 per cent discount on natural gas supplies from Gazprom. The main concession asked of Ukraine was a lengthy extension of the Russian Navy’s lease of a strategic Black Sea port.

Then on Monday night, Russian prime minister Vladimir Putin made a “large-scale offer” to Ukraine to merge their nuclear power generation businesses.

Kate Mackenzie

- Kerry: Still pushing forward on climate/energy bill

- Solar sales to soar, but will profits follow?

- Shale gas and Putin’s choice

- Life on an offshore oil rig

- Five myths about green energy

- How did the rig blowout occur?

Kate Mackenzie

Climate advocates pressure Senate to act on imperiled bill - The Hill

Renewable portfolio standard eyed at Senate climate washout looms - Argus

Russia offers Kiev nuclear power deal - FT

Gas prices may force shale drilling lower – Bloomberg

Opec would act if oil went above $100, says Kuwait – Reuters

GoM oil spill spreads as wells leak - Reuters

Indonesia to cut oil use, develop geothermal energy - Xinhua

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