Today’s Blog – Friday 20th March 2015

Introduction

Having adjusted my self-diagnosis conveniently down to “a virus” rather than “ebola”, I’m off to the ODI quarter final in Adelaide today.  Hopefully this will not be a critical scene in the future movie “World War Z II”!

Commodity prices

Overnight there was a retreat from yesterday’s prices, with current figures being US$43.81 for WTI and US$54.43 for Brent.  The largest factor in the fall appeared to be the return of market concerns over the ongoing build-up of stocks in the US, particularly at Cushing.

A recent story from Reuters did however bring forth some good news on the international oil storage front (albeit long term in nature) – namely the (apparent) ordering of first cargoes by the Indian Government to start to fill a strategic petroleum reserve (SPR) in that country.  The numbers aren’t particularly large – 8mmbbls of cargoes to start to fill an initial SPR capacity of 67mmbbls.  However, this is only the start, and be put into the US context of 691mmbbls of oil currently in the US SPR.  The PRC also maintains an SPR – but its levels are a State secret.  I expect India and the PRC to want to build up SPR levels to ones commensurate with their economic status (and vulnerability – both are far more vulnerable than the US).

Henry Hub fell slightly overnight to US$2.83.

LNG news

Although at first blush this is a pipeline story, it is in fact one with great relevance to international LNG markets.  Reuters recently reported that the massive Power of Siberia pipeline (from East Siberia to China) may be delayed – and instead Gazprom may prefer to focus on an alternative “Altai” pipeline from West Siberia (entering China between Mongolian and Kazakhstan).  The Power of Siberia faces technical – and likely most importantly – financing challenges.  I interpret this story as a further weakening of Russia’s position in the East of the country – a weakening that the PRC will be well placed to take advantage of through mechanisms such as seeking working interests upstream on favourable terms, etc.

If further signals emerge that this project is weaker than has been the consensus view in LNG markets – then that will provide opportunities for rival gas supply project proponents – particularly if they can be flexible (such as the Gulf of Mexico LNG projects).

New South Wales – CSG/CBM

CBM related madness in NSW has just gone up a whole notch (or notches).  The leader of the NSW Labor party, Luke Foley, was today quoted in the Sydney Morning Herald as being opposed to any CBM production from the Pilliga area.  Now this is not moose pasture – rather this is where Santos has sunk quite a bit more than $1B.

Displaying his complete ignorance – but what does that matter? – Mr Foley said this action was to protect the area’s “underground water storages”.

Government news – UK

Showing a somewhat greater knowledge about an important industry, the UK Government’s recent budget contained substantial tax breaks for the beleaugured North Sea industry.

It is interesting to note that when the new LNG projects come on line later this year, total petroleum production will be higher in Australia than in the UK.  Politically however, the industry here carries very little apparent weight – given factors such as the amount of foreign ownership, the low intensity of employment in the large LNG projects, etc.

Company news – Karoon Gas Ltd (ASX: KAR)

Your blogger must have put the mockers on KAR with my recent comment about their being lucky – KAR announced today that the Kangaroo West-1 exploration well had come in dry.

Company news – Woodside Petroleum Ltd (ASX: WPL)

Its back to calculating the next dividend payment over in Perth, as Pluto has now come back into full production.  Alternatively, Management can work on providing inputs for the Sustainability Report, such as stats on breaking policies, etc.

Quote of the day

Going back to old favourite Yogi Berra before I head off to Adelaide Oval: “Baseball is 90% mental and other half is physical.”

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