Today’s Blog – Wednesday 24th June 2015

Introduction

Following on from the blog’s prior discussion about the “alliance” with Shell recently announced by Gazprom, another aspect thereof are plans to expand the Nord Stream pipeline between Russia and Germany (which flows under the Baltic Sea, hence avoiding pesky transit nations, particularly Ukraine).

The mooted expansion is large – a doubling of capacity at a cost of US$11B.

However, Germany’s Mrs Merkel may not be as supportive of this as her predecessor, Gerhard Schroder, who drove the original construction of Nord Stream and who, completely coincidentally, is its current Chairman.

It is interesting to juxtapose this announcement with another one made in recent days by Poland’s Treasury Minister, who said the country expected to receive its first LNG shipments in a few months time.  The LNG boats making deliveries to Poland will be sailing directly above Nord Stream to reach Poland.

Commodity prices

Crude prices firmed last night, with Brent closing at US$64.45 and WTI at US$61.01.  The “data” factor behind the rise was the survey results expected for tomorrow’s US inventory numbers, which came out as another sustained draw of 2.3 mmbbls.  (However, the predictive power of this weekly survey appears to be quite weak).

The “events” factor behind the rise was an increase in the tempo of sabre-rattling between Russia and the decadent West – with talks about locating NATO troops and heavy equipment in the front-line Baltic nations.

The pincer action of “data” and “events” trumped the effect of a rise in the US dollar, which would otherwise have suppressed prices.

Henry Hub was flat at US$2.73.

LNG

Oil and gas news provider Interfax reported today that Indonesia is joining the ranks of those who are long LNG cargoes.

A spokesman from the country’s energy regulator, SKKMigas, stated that domestic gas demand was lower than the volumes due to be supplied from contracted LNG cargoes.  So these will join those seeking outlets in the spot market – a tight space at present.

Governments and fracking

Your blogster has received a first Facebook posting (from a chum who no doubt powers his computer by lentils, not fossil fuels) on the evils of fracking that are about to be unleashed on England’s green and pleasant land.  This well funded propaganda (Russia’s film industry is alive and well!) has emerged following the expected imminent permitting of Caudrilla’s long delayed drilling and stimulation program in Lancashire.

In the posted video, Australia’s Frackman warned his Pommy cousins about how Australia has been ruined (rooned!) by CBM (maybe he is the only one of his neighbours in Queensland who is not making money from the industry).

Unfortunately, these promotions are slick, emotive and powerful – and who cares about the facts!  I reiterate my view that any gas produced from on-shore England will be minimal.

Company news – Woodside Petroleum Ltd (WPL)

The Australian today reported that WPL had executed an Agreement with the Western Australian Government about royalties and domestic gas reservation for its operated Browse FLNG project.

Now all it needs is some customers!  That will be harder to get.

Meanwhile, the domestic gas market will just be confused, rather than aided by the potential large over-hang of gas from Browse  That will not assist the recently announced gas marketing efforts of AWE Ltd and Origin Energy Ltd over their Perth Basin gas discoveries – which only lie a few thousand kilometres nearer to market than does Browse.

Company news – Origin Energy Ltd (ORG)

The Sydney Morning Herald has today reported that the Queensland LNG project (APLNG) in which ORG has a 37.5% stake could face material problems ahead.  Partner and largest off-taker, Chinese NOC Sinopec, is reported to be not ready to physically receive cargoes in the PRC (due to delays in construction of its re-gas facility).

As noted above, the spot market for LNG at present does not present an attractive alternative for either or both of Sinopec and APLNG.

Quote of the day

Convincing words from a recent interview with Mr Putin and Gazprom’s Alexey Miller about gas marketing:

“I think we should act so that our partners feel themselves quite confident in our intentions, we should stick to healthy business relations. Also, we have to deepen their confidence that we will never use our economic connections as a tool to lobby our interests, which are not really tied to economics – we’ve never done this before and, of course, we are not going to follow this path in the future.”

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