Corporate news

BP, solar, De Beers, Centrica

In this week’s podcast: Interim results from BP fail to please investors; solar power – how economic is it? We ask CEO of Canadian Solar, Dr Shawn Qu; diamond company De Beers gets a new chief executive; and, Centrica – what should we expect from its results?

Presented by Sylvia Pfeifer with Vincent Boland, Pilita Clark, William MacNamara and David Blair.

Produced by LJ Filotrani

Sheila McNulty

Jim Mulva, chief executive of ConocoPhillips, has been in a hurry to establish his legacy. In the beginning, it was going to be as the head of one of the world’s biggest international oil and gas companies. And he got there, boosting Conoco into 5th place, in terms of production.

But then the economic downturn hit, and the weaknesses in his grow-through-acquisition strategy were exposed. It was no longer enough to be big, and Conoco was forced to slash capital spending, lay off staff and sell billions of dollars in assets.

Sheila McNulty

The weekend oil spill by ExxonMobil  into Yellowstone River gives environmentalists more ammunition in their long-running battle against granting the oil industry increased access to US oil resources.

While only the final investigation will prove whether Exxon failed to do some maintenance or take other measures that could have prevented the spill, one thing is certain: the US continues to have an unacceptable number of spills on both oil and natural gas pipelines.

Indeed, one of the key reasons raised by environmentalists to block the Keystone XL pipeline from bringing oil sands fuel from Canada’s tar sands across the US to Texas is the high number of spills on the first stage of that pipeline – the Keystone - in its first year of operation. The company says they are not significant. And Exxon might well be able to contain this spill so that it is not a massive environmental disaster.

But why does it seem regulators tend to wait until disaster strikes before taking appropriate action? There had long been signs that the Gulf of Mexico offshore was not being sufficiently regulated, yet the issue of permits continued at a rapid pace until Macondo struck.

The bottom line is that the US has had a number of red flags this past year on the need to improve pipeline safety. Perhaps the biggest of these was the fatal explosion of a gas pipeline in a California residential area.

But, less than a year later, Exxon is the latest to suffer a spill. Its reaction:

No cause has been identified for the release of oil from the pipeline, which met all regulatory requirements and has undergone inspection most recently in December. A field audit of the pipeline’s integrity management program was undertaken by US Department of Transportation Pipeline and Hazardous Materials Safety Administration in June.

So if regulators just inspected the pipeline, the question is whether they missed something? 

Ray LaHood, US secretary of transportation, late last year sent Congress proposed legislation to provide stronger oversight of the nation’s pipelines and increased  penalties for violations of pipeline safety rules.

Congressman Fred Upton, chairman of the House Energy and Commerce Committee, in June signalled his committment to updating and improving US pipeline safety:

Pipeline safety is a serious matter of protecting human life and our environment.  Our nation’s nearly half a million miles of pipeline infrastructure play a critical role in delivering vital energy supplies to southwest Michigan and the rest of the country.  Disasters like last summer’s Enbridge pipeline rupture underscore the unacceptable costs of failure and the need for meaningful updates to our current pipeline safety laws.

Representative Ed Markey, the top Democrat on the Natural Resources Committee and a senior member of the Energy and Commerce Committee, called on Tuesday for investigative hearings to be held into the Exxon spill and related safety and environmental issues:

 

ExxonMobil has turned parts of the Yellowstone River black with their spilled oil. Just as BP was held to account for their accident in the Gulf of Mexico, ExxonMobil should appear before Congress so that we can examine the holes in oil pipeline safety that led to this incident and how we might prevent another spill in the future. Several aspects of pipeline safety regulations may need review based on this disaster.

Mr Markey noted that Exxon had said that the pipeline had been examined within the five-year increments as required by law. He said that timeline may need to be reduced, in light of this accident and the others over the last few years. 

On top of that, higher penalties would help pay for better enforcement.  Surely, given all its budget issues, Congress can see the benefit of this?

Sheila McNulty

While oil patches from the Bakken shale to the Eagle Ford have been getting a lot of attention in recent years, the oil industry is focussed increasingly on one of the oldest and richest basins in the country – the Permian Basin. Permian formations have long trapped hydrocarbons in shale and other tight sands and rock in what was formerly the Permian Sea, an area of what is now 110-degree-heat desert that stretches 100,000 square miles across West Texas and Southeastern New Mexico.

The attention there is not coming so much from companies going out in search of new acreage. Many of them have held acreage in the Permain for decades. Others have accumuated it over the years through a series of mergers and acquisitions. Everyone has known the area held oil – lots of oil – and it was just a matter of time before advances in technology meant they could get a little bit more of it out.

Sheila McNulty

The technological advances in the oil and gas patch just keep coming. While everyone has been scrambling to catch up with the shale gas revolution, the industry has been working on another potentially significant breakthrough in gas. This one is in producing gas that has long been stranded offshore in areas too far or too small to warrant a pipeline to shore.

Royal Dutch Shell recently announced it would be the first producer to invest in a multibillion dollar project to capture this gas. The project will be a floating liquified natural gas terminal – known as a FLNG terminal in the industry – that makes it economic to get at such gas fields. No pipelines need to be built. Shell just produces the gas until it runs out and then moves along to the next field.

Sylvia Pfeifer

It’s been a fortnight of corporate comebacks for former BP executives. First out of the blocks was Tony Hayward, the former chief executive of the UK oil group, with the launch last week of his energy fund, Vallares. And this week, Andy Inglis, his former colleague who used to run BP’s exploration and production arm, made his first public appearance in front of City investors in his new job at Petrofac, the oil and gas service provider. Both men left BP last year in the wake of the Gulf of Mexico spill.

As head of BP’s upstream business based in Houston, Texas, Mr Inglis was in charge of its exploration activities at the time of the gulf accident. He resigned from the board of BP after Bob Dudley, who took over as chief executive officer from Tony Hayward after the accident, initiated a wholesale restructuring of the upstream division.

Mr Inglis heads Petrofac’s new Integrated Energy Services division which brings together the company’s solutions, energy developments and training services businesses. The division is focused on so-called ‘resource holders’ or national oil companies that own small and medium-sized undeveloped fields. Unlike other service companies, IES will not only provide straight-forward services such as engineering and construction but, where appropriate, it will also provide capital.

Mol Duna refineryHungary is taking no chances with control of Mol (MOL:BUD), the national oil company. After announcing a €2.88bn deal to buy back a controversial 21.2 per cent stake from Surgutneftgaz, the secretive Russian energy group, Budapest is proposing to up its stake further, to up to 24 per cent.

The fact that the cash-strapped government, which emerged from an IMF rescue only last year, is spending big money on increasing national control over Mol highlights how sensitive Hungary is over Russian influence in the energy sector. Most other central European states are no different. Oil sector investors in the region ignore politics at their peril.

The additional shares are coming from the semi- private pension funds that the government is nationalising, taking control of their €10bn portfolios, including a 2-2.4 per cent stake in Mol. Peter Szijjarto, the government spokesman, said on television late on Tuesday that the state would also retain these shares taking its stake to up to 24 per cent.

Kiran Stacey

We all knew that the collapse of BP’s deal with Rosneft to drill in the Arctic was more damaging for BP than it was for its Russian prospective partners.

For BP, the deal represented the chance not only to tap the significant Arctic resources for which Rosneft holds licenses, but also a chance to diversify away from the Gulf of Mexico, and to show the world it can still drill safely in difficult places, even after last year’s spill.

But Rosneft, while preferring the technical skills BP had to offer, still has plenty of options on the table. Big oil companies are lining up to take BP’s place and exploit the Arctic’s resources themselves. And none of them bring the baggage of existing Russian partners who could get in the way.

Kiran Stacey

Energy meterWith two private equity groups having pulled out of the bidding, Toshiba is closing in on a $2bn deal to buy Landis+Gyr, the world’s largest smart-meter maker by revenues.

The battle for the company shows how big an opportunity companies and governments view demand-side management. L+G already has orders to provide 62,000 meters to Finland’s Oulu Energy; and more than 10,000 to six provinces in China, which will create the world’s largest smart grid.

Russian president Dmitry Medvedev at a news conference May 18They should have done their homework. That’s the view of Russian president Dmitry Medvedev on the collapse of the BP-Rosneft deal. And it’s hard to fault his conclusion, delivered at a mega press conference on Wednesday that was broadcast live.

Although he did not say so, his criticisms were aimed at both BP and Rosneft – and deputy prime minister Igor Sechin, the former Rosneft chairman, who was forced to leave the company earlier this year on Medvedev’s orders.  And the confident-looking president even allowed himself a little swipe at Russia’s most powerful man, prime minister Vladimir Putin.

The president implied that BP and Rosneft should have anticipated opposition from the Russian oligarchs who are BP’s partners in its current Russian venture, TNK-BP. “Those who prepared the deal should have paid closer attention to the nuances of the shareholder agreement,” Medvedev said.

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