Today’s Blog – Thursday 25th June 2015

Introduction

Today’s Russian news turns from the new “alliance” between Gazprom and Shell to the older relationship between Rosneft and its 20% shareholder, BP.

The two parties announced last week a working interest level deal whereby BP is paying US$750M for a 20% stake in an East Siberian oil-field which currently produces 20,000 bopd (to be ramped up to 100,000 bopd in the next few years).  It is likely only the financial pressure that the Russian NOCs (they are such in control if not ownership terms) are currently under that provides an opportunity for the likes of BP to take such a direct interest in an asset.

The field is also said to contain ~5 TCF in gas.  Based on numerous public statements, it appears that Rosneft would like to take on Gazprom’s dominance in Russian gas – but the location of this field likely would make it difficult to produce this gas, at least in the short/medium term.

Commodity prices

Crude prices fell overnight, with Brent closing at US$63.50 and WTI at US$60.25.

On the data-driven side of the market, the official US inventory number of a draw of 4.9 mmbbls was higher than expectations – but was countered by an unexpected build in product (gasoline and distillate) of around half that number.  This, combined with an EIA report indicating that US production was still rising (albeit based on a helicopter level methodology), gave impetus to the bears’ view that the market was still very long.

On the “events” side, perceptions over a resolution (i.e. can-kicking exerciser) for the Greek debt issue have soured.

What should be a positive note for the bulls is that it looks like the deadline date for a deal Iran nukes is likely to be extended post 30th June – but there was little sign of the market focusing on that yesterday.

The Henry Hub gas price was flat at US$2.77.

LNG

The leader in British Columbian LNG, the Petronas operated Pacific Northwest LNG JV, is busy making some moves to try and move from “conditional” FID to actual FID:

  • The BC legislature has foreshadowed it will hold a session in its normal summer holiday in a few week’s time to ratify the long term tax deal done by the executive.
  • The project proponents are pro-actively seeking to find new ways to deal with First Nations concerns over salmon, etc. This is at tougher issue than a tax deal.

As noted recently, the composition of this JV, being largely customers/NOCs, makes it less exposed to the current long nature of LNG supplies.

 Governments and fracking

The lentil powered computers are running hot over in Facebook-land – taking issue with a fact-based comment from your blogster on the (supposedly) imminent re-starting of shale drilling in England.

Apparently “they” (that is, us participants in the oil and gas industry) are deliberately holding back renewable technologies which could easily supplant fossil fuels tomorrow.  Who knew we were so clever!

Although just an anecdote, this demonstrates again that extracting fossil fuels from locations where a lot of relatively wealthy people live (coincidentally consuming said fuels) will prove very difficult.

Company news – Buru Energy Ltd (BRU)

BRU today reported the P&A-ing of the Olympic-1 exploration well in its vast Canning Basin acreage.  No material hydrocarbons were observed in the target reservoir.  The well was funded by ex-Apache, now Quadrant Energy.

Company news – Tap Oil Ltd (TAP)

TAP provided an update today on its multi-pronged legal disputes with its largest shareholder and joint venture partner in Thailand.  As noted previously in this blog, the company’s lawyers are having the proverbial field day.

However, whether the law will prevail over the power of a local oligarch in a developing nation will still have to be tested.

Quote of the day

Something rather more high-brow today, from those close observers of Russian history as encapsulated by the figure of Rasputin.  I’m talking about Euro-Disco gaints, Boney M, who pithily summarised the nation as:

“Oh those Russians!”

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