Daily Archives: June 10, 2010

Shares in BP fell sharply in London, as UK industry expressed alarm at the ‘inappropriate’ and increasingly aggressive rhetoric being deployed against BP by Barack Obama, US president. Ed Crooks, the FT’s energy editor, talks to Daniel Garrahan about the dire situation for BP and why Obama is making the oil company a scapegoat.

Clive Cookson

A fascinating sub-plot within the Deepwater Horizon disaster concerns the 4.3m litres of chemical dispersants that BP and its contractors have sprayed and pumped into and onto the spill, in an effort to break up the oil.

Most experts accept that the Corexit dispersants, made by Illinois-based Nalco, have reduced pollution along the Gulf coast. But many environmental scientists are concerned that marine life in the deep waters may pay a heavy price, if the chemicals have increased the amount of oil dispersed in “clouds” or “plumes” through the sea.

Although people have known roughly what Corexit contains – surfactants and emulsifiers, alcohols, light petroleum distillate – objective assessment of the effect and toxicity of Corexit has been hampered by the Nalco’s stubborn refusal to release publicly the full list of chemical ingredients, on grounds of commercial confidentiality.

Kate Mackenzie

Will the Gulf oil spill change oil supply dynamics?

Many have pondered this question, as the International Energy Agency notes. But the IEA itself says that while it’s a tragedy, the likely effects on global oil markets are less striking.

The IEA maintains that the impact ‘remains to be seen’, though it does make a rough estimate:

True, analysts and journalists have rushed to provide estimates of how much deepwater supply is at risk, even before exact causes and proposed remedies are clear (our own tentative view is up to 300 kb/d by 2015).

Not an insignificant number, but with the 2010 demand forecast now at 86.4m barrels a day (after a small upward revision this month), it’s clearly not going to weigh very heavily.

Kate Mackenzie

Even while the Gulf oil disaster might be concentrating minds on the risks of fossil fuels, US Congress is now looking more unlikely ever to pass an effective climate bill.

Republican Senator Lindsey Graham, who until recently was a key supporter of the Boxer-Kerry cap-and-trade climate bill, on Wednesday threw his support behind a bill proposed by Richard Lugar, another Republican Senator, which has plenty of incentives and some regulations, but no financial mechanism for reducing  emissions.

The Union of Concerned Scientists says analysis of the outline of the Lugar bill suggests it would only reduce emissions by 9 per cent; far short of the amount expected of the US in international climate negotiations. And a failure by the US to set adequate emissions targets means that the key developing countries are unlikely to come to the table either.

The ignominies continue to pile up for BP as its share price continues to plunge (it’s now down more than 40 per cent since the April oil-rig explosion and at the lowest level since April 1997) and continuing oil-leak woes.

And scenarios that would have been unthinkable even just weeks ago are being taken seriously.

First up, StanChart has fanned the flames of BP takeover speculation with a Thursday note on what it called the “persuasive economics” of a PetroChina offer for BP.

While StanChart acknowledged the potential for a “full dose of scepticism” on the deal as a “real-world proposition”, it justified its argument on widespread media speculation about a possible takeover of BP.

Kate Mackenzie

Last week US company Cheniere Energy announced plans to build an LNG export terminal at Sabine Pass, on the Texas-Louisiana border. The company already operates an LNG import terminal there. It’s still early days; the company is talking to potential customers about contracts, but says it could be liquifying and exporting LNG by 2015.

So why the about-turn? Shale gas, naturally, is the obvious reason; US gas production has risen dramatically thanks to the Marcellus and Haynesville plays.

But does this mean a new era for US natural gas? Does net exporter status beckon? It’s not quite as clear-cut as that, yet.

Meanwhile, traders claim BP’s CDS has traded at 510bps on Thursday morning, up from 386 at the close on Wednesday.

Related links:

A further, further BP indignity – FT Alphaville
A further indignity for BP? FT Alphaville

Kate Mackenzie

- 100,000 barrels per day?

- Lindsey Graham rambles about his stance on climate change

- How deep 5,000 feet is, illustrated

- See all the deepsea oil action in high definition

- Is China freezing renewable energy IPOs?

- Oil’s share of primary energy supply is falling rapidly

- History of peak coal

Kate Mackenzie

- BP faces bill for lost drilling wages - FT

- BP finds unlikely ally in former critic – FT

- Obama’s BP attacks spark worries in UK - FT

- BP shares hammered amid scrutiny - Reuters

- Firefighters try to stop blaze at Iranian well - FT

- Business leaders call for tripling of US energy spend – NY Times

- Opec cuts forecast demand for its crude – Bloomberg

- Coast Guard toughens oversight of BP compensation – NY Times

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