By Jonathan Wheatley, Brazil correspondent
The BP debacle in the Gulf of Mexico has thrown a shadow over the global oil industry that, strangely, has not reached as far as Brazil.
“The debate is really at the margin,” says Christopher Garman of Eurasia Group. “There’s been no questioning or even any concern that given what’s happened in the Gulf we should think again about the pre-salt.”
This is odd, given that the risks soon to be faced in Brazil are similar to or greater than those found in the Gulf.
Brazil’s pre-salt fields were discovered in 2007 and are in the early stages of exploration. They are, as their name suggests, trapped beneath a hard-to-penetrate layer of salt that poses technical problems not yet faced anywhere in the world. They are also under a lot of rock and seawater. The much-talked-about Tupi field, for example, lies under 7,210 feet of water, rather more than the 4,920 feet of water under BP’s Deepwater Horizon rig.
No doubt about it: China’s national oil companies (NOCs) have been making some very big foreign acquisitions in the past 18 months:
In fact, Wood Mackenzie says China actually accounted for a decent portion of total world M&A last year, across all sectors:
Tuesday’s six-notch rating downgrade of BP by Fitch to BBB, appears to have spooked some of the firm’s oil trading counterparties.
According to Reuters, Bank of America Merrill Lynch supposedly told traders to stop entering any new oil trades with BP that extend beyond June 2011.
As the newswire reported:
The order to the bank’s traders came from a high-level executive and was made on Monday, according to a source familiar with it. It told traders not to engage in trade with BP for contracts beyond one year from this month. The directive didn’t state a reason for the limit on longer-duration trades with the oil company, which comes as the British oil giant scrambles to stop an oil spill in the U.S. Gulf of Mexico for which it could eventually face billions of dollars in economic liabilities.
Of course, BofAML is not really a huge player in the industry — and the fact that it won’t deal beyond 2011 with BP will hardly be a blow for the company. As Reuters also points out in the story, it’s certainly not one of BP’s main counterparties.
He mentioned the climate bill and the need to move away from ever-more-scarce oil, but for all the talk of energy ‘transitions’, Barack Obama’s Oval Office speech was too short on specifics for some.
Some are pointing out parallels with the approach he took on healthcare; others are unimpressed with the failure to mention ‘climate change’ or more actual measures that would be taken to achieve the momentous transition his speech alluded to.
The US Climate Action Partnership, the coalition of business organisations that supports a market-based approach to climate policy, wrote:
USCAP believes that America must take control of its energy and economic future while enhancing our national security. We urge Congress to enact national energy and climate legislation this year to reinvigorate our economy, create American jobs, unleash American innovation, improve our energy security, and protect our environment.
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When word came that President Barack Obama was going to use the oil spill in the Gulf to push the clean energy agenda on which he came to office, those who support such a future grew excited. Anyone who believes that carbon dioxide emissions are not only polluting but adding to the problem of global warming began contemplating the action the president might take.
Forcing government vehicle fleets onto hybrid vehicles or natural gas, ensuring all new government structures are energy efficient, and so on, were all floated as potential plans. But there were warnings that none of this might come to pass.
Amy Myers Jaffe, energy expert at the James A Baker III Institute for Public Policy, said former President George W Bush missed a similar opportunity to move toward alternate sources of energy and promote energy efficiencies following the September 11 attacks, when he very easily could have done so under the guise of promoting energy security.