Today’s Blog – Tuesday 14th April 2015

Introduction

We had a fairly quiet night on crude oil markets and the ASX has not been much livelier so far today.

Still much analysis is flowing from the Shell/BG deal – including today’s The Australian newspaper coming to the not surprising conclusion that the deal may not exactly elevate Australia’s expensive LNG projects such as Browse up the development merit order.

Commodity prices

Crude edged up marginally overnight, with Brent at US$57.93 and WTI at US$51.96.

The IEA’s Chief Economist (and soon to be boss) Fatah Birol further dampened down speculation on the effect of an Iranian nuclear deal on crude supplies, noting that in his view it would take 3 to 5 years to bring much Iranian production back on line – due to factors such as bad field oil-field practices over some time in what are complex reservoirs, etc.  This timeframe would coincide with the expected reduction in global production in a few years time which would inevitably follow from the last few month’s massive reductions in capex by oil and gas companies.

Henry Hub closed at US$2.51.

LNG

Japan’s METI published its Japanese LNG spot price for March last week – the only public figure for this metric that is available outside the fee-for-service number from the likes of Platts.  The price had edged up slightly from February, from US$7.60 to US$8.00 per MMBtu – still well below half of what it was last year.

In my view the very fact that METI does this is of as much interest as the number itself – as it indicates a non-traditional Japanese approach to try to liberalise the inefficient international gas markets.

Governments and fracking

The State of Maryland in the US is the latest jurisdiction to put in place (subject to Gubernatorial sign-off) a “moratorium” on fracking.  As usual, a panel will examine “scientific, etc, evidence” to determine if this seventy year old practice should be permitted – as long as any findings are made after the next election of course.

New South Wales – need for gas?

The Australian Energy Market Operator (AEMO) put out a report yesterday which concluded that NSW would not face any gas shortfalls for the rest of this decade – which opponents of CBM developments in the State naturally seized upon as confirmation of their position (which put simply, is that gas should be supplied from “somewhere else”).  However, an initial examination of some of the inputs into the report seemed to suggest a strong degree of faith in the workings of East Coast gas markets, which are arguably not that economically efficient, given the degrees of concentration and ad-hoc regulation which exist in them.

Company news – Karoon Gas Ltd (ASX: KAR)

KAR announced yesterday a discovery in its Echnida-1 exploration well offshore Brazil.  Little detail was given at this point, other than the existence of shows and the need for wireline, etc, logging.  It is possible a premature announcement had to go out because of potential leakage to the market.

Company news – FAR Ltd (ASX: FAR)

FAR yesterday put out a presentation on the path forward for its Senegal discoveries of last year.  A firm 3 well program is planned for the latter half of this year – and the market will take comfort that FAR’s share of the cost of those wells at an estimated US$25M is considerably lower than its current cash balance.  FAR at this stage concludes that the current view on volumetrics in the discoveries would support an FPSO development, even at low oil prices.

Company news – Buru Energy Ltd (ASX: BRU)

BRU shareholders will be pleased to note that today the Company procured formal Native Title approval from all relevant groups for the securing of production licences for its Ungani oil-field development in WA’s Canning Basin.  This has been a long journey for BRU, but no doubt one worth doing properly.

Quote of the day

This one appealed to your blogster (given his Caledonian upbringing) – a quote from last week’s Economist from an un-named Scottish Labour MP, who faces almost certainly losing his seat in the imminent British election, but who is still adding to the proud poetic tradition of the Scots:

“I’m set to Defcon F*cked. I’m expecting to leave and never come back.”

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