Daily Archives: June 22, 2010

Sheila McNulty

Anadarko Petroleum has no choice but to sue BP in hopes of forcing the UK company to cover all cleanup costs from the gushing oil well they co-own with Mitsui. But even if it wins that case, lasting damage may have been done. Scott Hanold, a managing director at RBC Capital Markets, says the US independent has $40bn in asset value – far higher than the $5bn maximum he and many analysts estimate Anadarko could be forced to pay as a 25 per cent owner in the leaking well if it is determined they are responsible along with BP.

But nobody knows how high any potential liabilities might be, and that uncertainty has spooked investors. The well has been leaking since April 20, and BP is counting on a relief well in August to stop it. Guy LeBas of Janney Capital Markets, said in a recent report:

Drilling a well thousands of feet into rock to hit a target no more than six inches wide isn’t exactly a sure thing…For that reason, despite assurances from the company and public officials, there remains a risk that the leak could continue past August.

Kate Mackenzie

Should the US be getting in more foreign help to deal with the Gulf oil spill?

The Obama administration has so far declined to broadly suspend the Jones Act (aka the Merchant Marine Act of 1920), which requires all commercial ships travelling between US ports to be US-built, owned, and crewed. In fact the government has declined most offers of foreign assistance altogether, as this list released on Friday shows.  Most offers of boom, dispersant, technical services and so on (almost all for a fee) from some 25 countries are still ‘under consideration’, weeks after they were first made.

Plenty of media outlets have questioned if this was wise, along with the odd politician. A shortage of boom for example has been one of the big complaints about the clean-up operation so far. Mind you, authorities are also eschewing similar offers from local entrepreneurs, too. Buying in foreign support wouldn’t look too great.

But oil market analyst Stephen Schork believes the Jones Act suspension during Katrina, which allowed in more gasoline shipments, was a good move.

Kate Mackenzie

Has Thad Allen, incident commander for the Gulf oil spill, reassured those fearing a deeper rupture in the well casing?

The worry, of course, about a leak or rupture deep in the wellbore itself is that it could make the leak more difficult to fix.

Senator Bill Nelson and representative Dennis Kucinich – (both Democrats, but at almost opposite ends of the party’s political spectrum) have both raised the prospect of a well casing problem that makes the well leak ‘unfixable’.

Many blogs posting about the possibility of a well casing problem have pointed to a Wall Street Journal report saying that BP said its ‘top kill’ attempt “may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor”.  An anonymous Oil Drum commenter wrote a much-linked-to piece arguing that a ‘disk’ wouldn’t appear at such a depth, therefore the report most likely pointed to a problem in the wellbore.

Russia and gas disputes go hand-in-hand.

And the latest dispute of this nature is focused on Belarus.

Russia’s Gazprom claims the country owes it $192m in unpaid gas payments. On Monday, therefore, the company decided to cut gas supplies to Belarus by 15 per cent in a bid to force its neighbour to pay-up.

When that didn’t work, Gazprom upped the ante further. On Tuesday, the company’s chief executive said it would be cutting supplies to Belarus by 30 per cent as of 10am London time.

Kate Mackenzie

The effects of the Gulf of Mexico oil spill (or gusher, if you like) may be having a negligible effect so far on world oil markets, but oil companies not involved with the Deepwater Horizon are seeing implications well beyond the threat of tighter regulations.

For example it seems that Shell is having to pay more to borrow money in the credit markets as a result of the disaster. From Bloomberg:

Investors demanded an extra 110 basis points in yield over U.S. Treasuries to buy the five-year notes from Shell, compared with 89 basis points for existing debt of similar maturity from the company, which is based in The Hague.

Shell argues that its approach to safety is different and superior to BP’s, but it can see that the disaster will affect the industry as a whole. Plus, credit markets worry about Shell’s vulnerability to a prolonged moratorium on deepwater Gulf drilling, given the number of its rigs there.

Kate Mackenzie

- A colossal fracking mess

- The gusher era

- Why isn’t the ‘spill’ called a ‘gusher’?

- BP, Transocean tap a well of lobbyists

- An ‘acoustic anomaly’ in the Gulf

- Cutting working hours to save power

- A serious take on a humorous take on energy independence

Kate Mackenzie

- Hayward acts to stem BP identity crisis - FT

- Democrats scour for BP sympathisers - FT

- Reliance paused for US shale gas deal - FT

- Energy secretary says ‘top kill’ should have been tried earlier - LA Times

- Enel’s green credentials challenged ahead of IPO - FT

- Shell penalised by bond market – Bloomberg

- Russia cuts gas supplies to Belarus - FT

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