Today’s Blog – Thursday 30th April 2015

Introduction

Changes in the Kingdom of Saudi Arabia always make the oil world sit up and take notice.  The new King has just announced a change to his successor (thereby changing the rules of succession for the Kingdom which have operated for many decades, namely a break from the rule that the Kingship passes down brothers, rather than to the next generation – a potential source of long term instability?) and various new Cabinet posts.

The very long serving Oil Minister, Al-Naimi, is no longer Chairman of Aramco – he has been succeeded by Aramco’s CEO (it is not clear if he is still CEO as well as now being Chairman).  How much longer the 79 year old highly respected Al-Naimi will remain as Oil Minister now has to be questioned.

Commodity prices

Oil ticked up overnight, with Brent finishing on US$65.84 and WTI on US$58.58.  The news from the KSA above was no doubt a factor, as was a less than expected increase in US oil inventories.  Oil stocks actually fell at Cushing (although gasoline stocks were up – come on Chuck Griswold -start driving to Wallyworld!).

Henry Hub was flat again at US$2.59.

LNG

Japan’s METI has just issued a report on its long term energy plans for the country.  This envisions by 2030 a roughly 4 way split in electricity generation fuel usage between gas, coal, nuclear and renewables.  This represents a fairly substantial change from the status quo in a relatively short period of time,

I would not underestimate the ability of METI and the japanese people to deliver this.  The country has much less renewable penetration at present than peers like Germany.  Its gross underutilisation of its geothermal potential is particularly noticeable in comparison to its Pacific ring-of-fire equivalent, New Zealand.

This report should temper any expectations of long term LNG demand growth from Japan.  Indeed demand decline is more likely.

Also from Japan was a news report concluding that the new JERA LNG buyer would rival Kogas in its influence on world LNG markets (Kogas is currently the buyer for all of South Korea’s LNG – but will this always be the case?  Government induced competition could occur, as it is understood that Kogas is out of favour with the current ruling party).  The strong Japanese policy position – which JERA will be a key implementer of – is to liberalise LNG markets and for instance reduce oil price linkages, etc.

Company news – Santos Ltd (ASX: STO)

Today STO held its AGM. Your blogster was an attendee (hence the later than normal delivery of this blog).  Although the meeting did not set the world alight, there were a few things worthy of mention, notably the close shave the company had in almost having a “first strike” under the remuneration report vote.  I’ll deliver a fuller report tomorrow.

Company news – Senex Energy Ltd (ASX: SXY)

SXY issued its quarterly report earlier this week.  It had the expected industry-standard news on falling revenues, capex cuts, etc, etc.  Points of more interest were:

  • Work on the ex QGC/BG coal-bed methane field “Lacerta” just to the north of GLNG’s Roma field is ongoing – and SXY is seeking a deal from a farminee or equivalent on its 100% position there.  STO has recently reported better than market-expectation results from Roma and it will be interesting to see if these translate – in a technical sense and hence farmin interest – to SXY’s acreage.
  • SXY’s MD has also followed up STO in responding to the recent AEMO report which concluded that gas supplies would be adequate for NSW in particular in forthcoming years.  SXY and STO (and your blogster) think that the AEMO report is shoddy in various ways.  For instance, in my view, large so-called reserves (don’t trust ASX reporting!) do not translate to deliverability without a lot capital – which may not be forthcoming.

Company news – other ASX listed companies

Today numerous ASX small caps have issued their quarterly reports (today is the last day for doing so).  The iron rules of ASX reporting suggest that the later a quarterly report goes out, the worse the news therein might be.  This blog will report to its readers any particularly interesting items from this plethora of reports in coming days.

Quote of the day

I can’t leave “Tiger Mike” Davis alone this week.  Safety reporting in the old days:

“Any accidents involving a rig, trucks, cars, or employees, other than minor ones, the Houston Office will be notified so that my secretary can notify me. If on weekends or nights, the superior in that area knows how to reach me. If it is a death, call me at night or weekends. Other than that, the person having the accident should have the brains enough to take care of it until the next day”.

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