Today’s Blog – Tuesday 21st July 2015

Introduction

Unfortunately there has been no follow up gossip (I mean news) from the AFR on the speculation that Occidental Petroleum was in town recently to talk to Oil Search Ltd about a takeover.

And no sighting of Oxy’s jet flying into Adelaide for a similar Santos Ltd (STO) discussion either (the days when STO had its own jet seem to sadly be behind us – but industry rumours have circulated of the purchase of a plane last year to assist in managing its troubled Gunnedah operations in New South Wales).

Commodity prices

Crude prices softened again overnight, with Brent closing at US$56.54 and WTI at US$50.15.  WTI dipped into territory with a “four” in front of it at one part of the day, but by close just managed to scrape back to a psychologically much more acceptable >US$50 number.

Iranian crude continued to the main factor overhanging the market.  Elsewhere in the Middle East, it was recently reported that Saudi production in June continued to grow – to 10.6 mmbbls per day.  This is pushing up against the edge of the KSA’s vaunted spare capacity – at least of the behind pipe type (no doubt flow could be added by in-fill drilling in existing fields, but possibly just sacrificing Peter to pay Paul).

How much the KSA is actually consuming itself for electricity generation (its hot, damn hot, up there right now) and exporting as product is somewhat unclear at present – not untypically in the murky world of OPEC reporting.

The Henry Hub natural gas price closed down slightly at US$2.83.

LNG

The AFR today expanded significantly on the story we mentioned yesterday – union troubles and ever ongoing cost blowouts at the mighty Gorgon LNG project on WA’s Barrow Island.  As we noted, the impending coming to an end (over budget and behind time) of the project has given the unions large incentives to gouge what they can whilst they can.

The Australian labour law environment seems to facilitate that gouging, although I am no doubt not alone in getting tired of Operator Chevron’s never ending bleating about this (Management’s job is to manage in the circumstances they face).

Meanwhile in British Columbia, the Province’s legislature is this week likely to pass a bill that provides fiscal stability, etc,  for the LNG projects mooted for the area.  The proponents of said projects would be well aware of the Gorgon experience and be concerned about its repitition in a country with many shared characteristics to Australia.  Indeed, a few months ago, Kogas (a partner in the Petronas led Pacific Northwest LNG project) made the specific comparison.

However, such cost issues don’t seem to be fazing US Gulf of Mexico States LNG leader Cheniere Energy, who should start shipping first cargoes by the end of this year and is talking of massive expansions.  Labour laws in Texas and Louisiana are somewhat less restrictive than in Australia or Canada (and also relevantly – from a Management perspective when it comes to building liquefaction plants, Cheniere is not Chevron).

Company news – Central Petroleum Ltd (CTP)

CTP today announced the latest reserves and resources figures for its Palm Valley and Dingo gas-fields in the NT (which were 57 PJ of 2P and 52 PJ of 2C).

With his typical chutzpah, the company’s MD, Richard Cottee, noted that the contingent resources would become reserves “when” the NT Gas Interconnector pipeline (otherwise known as the post-it note pipeline) becomes certain.

Company news – Transerv Energy Ltd (TSV)

Micro-cap TSV yesterday announced the imminent spud of a 2 well program in the Warroo tight gas field in the North Perth Basin.  TSV is fully carried by aluminium giant Alcoa for this program.

TSV’s announcement managed to completely avoid any mention of unpalateable matters such as “fracking”….

Company news – Orca Energy Ltd (OGY)

A few months ago OGY announced that failed coal baron Nathan Tinkler would become the company’s Executive Charman as part of a re-capitalisation process.

That deal fell over.  Now Mr Tinkler is the subject of an arrest warrant issued by the South Australian Courts following his not turning up at a hearing due to deal with (surprise, surprise) unpaid debts.  OGY will have to look elsewhere for a saviour.

Quote of the day

The re-emergence of some FIFA news (Sepp Blatter being showered with fake money by a prankster) allows me to re-open the rich vein of FIFA quotes.  This one from an Argentinian representative of that saintly organisation:

“With the English bid I said: “Let us be brief. If you give back the Falkland Islands which belong to us, you will get my vote.” They then became sad and left.”

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