Today’s Blog – Wednesday 3rd June 2015

Introduction

The curse of the Blog strikes – and Sepp Blatter quits.  Keen readers of satirical on-line magazine, The Onion (including accused senior FIFA official, Jack Warner, who last week mistakenly pointed to a fictional Onion news story as support for his position) will be relieved that poor Mr Blatter “Resigns from FIFA with Generous Severance Bribe“.

Meanwhile, back in the oil and gas sector, the lead-up to Friday’s OPEC meeting is a bit of a non-event, other than the market responding positively to al-Naimi’s views that demand is rising and supply falling (funnily enough, that usually happens when prices fall).

Commodity prices

Overnight, crude prices rallied quite strongly, with Brent closing at US$65.49 and WTI at US$61.26 (the highest this year for WTI).  Analysts concluded that a falling USD, together with a Reuters survey that concluded we will see another large inventory draw, were the prime drivers for the rise.

Henry Hub rallied a bit from its recent falls, closing at US$2.70.

LNG

The challenging Yamal LNG project based in Northern Russia had a couple of boosts recently, with a distinct French Connection.  Firstly, project partner Total indicated it could provide some financing support whilst a longer term solution from Chinese banks was sourced.  Secondly, Engie (previously GDF Suez) signed up to a long term purchase contract.

When this type of coincidence takes place, it may well be the case that the French Government has taken some sort of coordinating role – for instance helping Russia on this to counterbalance something else such as the cancellation of warship deliveries.

The world’s largest pipeline project, from West Siberia to China (which therefore impinges directly on LNG markets) apparently took some further steps forward recently, with Gazprom announcing that pipeline construction had now started on the Power of Siberia pipeline in the PRC as well as in Russia.

The (apparent) speed of construction here could be compared with, e.g. the Alaska LNG pipeline project.  Last week an update was provided on the environment, planning, etc, work being done on this (which, unlike the Power of Siberia, benefits from basically following an existing oil pipeline route).  That amount of work is enormous, with $100Ms already spent.  I suspect the degree of environmental rigour being followed in Siberia is slightly less.

Governments

As a counter-point to yesterday’s news about the US State of Maryland imposing an embargo on fracking, the traditional oil-field State of Oklahoma has recently passed a ban of its own: on frack-bans (from for instance, local townships).  This follows a similar move by Texas.

Clearly Australia is not the only place where vastly different views on the risks of fracking are delineated by State political lines rather than scientific facts.

Company news – Karoon Gas Ltd (KAR)

KAR’s Managing Director, Bob Hosking, was quoted in the Sydney Morning Herald today (rather than making an ASX announcement) to the effect that his company was in talks with Brazil’s Petrobras over developing a regional production hub into which KAR’s recent Brazilian discoveries could be tied.

Given Petrobras’ greatly weakened balance sheet and its other priorities, this would likely not be top of its investment list, but possibly some third party capital could be brought in, particularly given the current takeover for KAR’s partner, Pacific Rubialies.

Company news – Linc Energy Ltd (LNC)

This somewhat bizarre coal/coal-gasification/oil exploration & production/etc company moved its listing from the ASX to Singapore a couple of years ago. Cynics at the time thought the move was because ASX pundits had tired of its shameless over-promising/under-delivering.

LNC’s share price on the SGX has been spiralling downwards in recent months and it has just announced a restructure of its debt facilities.  More recent cynics might say that the leopard has not changed its spots.

Company news – Central Petroleum Ltd (CTP)

CTP has gone into a trading halt this morning, pending news about a new joint venture.  Industry scuttle-butt in recent times has canvassed the possibility of CTP joining up with Santos Ltd (STO) in the Mereenie asset in the Northern Territory.

It will be interesting to see if STO has done a deal with CTP – as any such deal would be essentially “subject to finance”.  That would not be STO’s preference and would signal a less than robust asset market at present.

Quotes of the day

“Why would I step down?  That would mean I did wrong.” – Sepp Blatter – a few days before he stepped down.

“I’m fairly confident that we will have another round of indictments,” – a statement last week from Richard Weber, the chief of the IRS unit in charge of the FIFA criminal investigations.

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