The amount of private equity moving into the US oil and gas sector has risen dramatically over the past year, drawn by a long-term bet on rising commodity prices and heightened demand for energy infrastructure. This is according to PwC, the consultancy, which put out a report on US energy sector deals on Tuesday.
Overall, there were eight private equity-backed transactions in the first quarter of this year, representing $4.8bn, or 9 per cent of total deal value, compared to just one during the same period last year, worth $767m, the report said.
Figures from PwC
The big question for months has been what would happen if there was a significant spill in the deepwater outside the Gulf of Mexico. Following BP’s Macondo disaster, the industry worked together to build two spill response systems for this area. But nobody said what would happen if a deepwater disaster unfolded in the waters offshore Ghana or Brazil.
Now the industry has gathered together to address that question. Nine of the world’s biggest oil and gas companies – BG Group, BP, Chevron, ConocoPhillips, ExxonMobil, Petrobras, Shell, Statoil and Total have launched the Subsea Well Response Project (SWRP), an initiative designed to enhance the industry’s capability to respond to subsea well control incidents.
There is no doubt it is hard to feel sorry for Big Oil. It pulls in billions of dollars in profits whenever oil prices go up, and yet higher oil prices result in higher petrol prices for the public.
So whenever these companies are doing well, the public is doing worse. And that, inevitably, leads to talk about punitive taxes (or at least a loss of tax breaks) for the oil industry.
That time has come once again. A few weeks ago, the world’s biggest oil companies reported massive profits just as petrol moved up and beyond, in some cases, $4 a gallon. That is a big deal in the US, where people often commute long distances to work, particularly in sprawling cities like Houston, Chicago, Los Angelos, and other highly populated areas. And it is particularly important now when the economy has not fully recovered, unemployment remains high and the public at large is still having economic difficulties.
The rise in US crude oil prices has been pushing petrol up toward $4 a gallon – a level analysts note has historically led to a drop in consumer demand. The current national average price of petrol is just under there, according to the Daily Fuel Gauge Report by AAA, America’s largest motoring and leisure travel membership organization.
John Felmy, economist at the American Petroleum Institute, the national industry trade association, said the last time crude oil prices were hitting these levels – in 2008 – consumer demand for petrol began dropping around the $2.80 per gallon level. The bigger declines were when gasoline rose above $3.75 a gallon, he said.
Newsflash from Reuters:
15:15 06May11 RTRS-BP PLC <BP.L> – ARBITRAL PANEL PERMITS CONDITIONAL COMPLETION OF BP-ROSNEFT SHARE SWAP
15:16 06May11 RTRS-BP PLC <BP.L> – ASSIGNMENT OF ARCTIC OPPORTUNITY TO TNK-BP
15:16 06May11 RTRS-BP PLC <BP.L> – THE ORDER ALSO PERMITS THE PROPOSED SHARE SWAP BETWEEN BP AND ROSNEFT TO PROCEED
BP shares are now on the up following early morning falls.
More on this to follow from our energy editor Sylvia Pfeifer.