Today’s Blog – Wednesday 22nd July 2015

Introduction

With the Australian media currently agog at the excessive expense claims made by our nation’s glorious Speaker, it is interesting to note a parallel story about the rather larger opportunities to make money from the oil industry at the apex of Russian politics.

The Times of London has recently reported on a New York based legal case which aired reports that in the 1990s Putin had “acquired” a 4% stake (either a profit share or a much more valuable royalty share – the story is unclear) in an energy company called Sovex in return for allowing it to exist.

As this blog has previously reported, Putin is also rumoured to be a major shareholder in massive commodity trading company Gunvor.

However, he is faced with a question that Bronwyn Bishop does not have to consider – how can he actually ever retire and spend his money and not have to spend the rest of his life looking over his shoulder at what the next Tsar might do?

Commodity prices

Oil prices in the US seem to have some support (for now) at just above US$50, with WTI closing up overnight at US$50.86 and Brent at US$57.04.  Without much news, a fall in the US dollar appeared to be the main driver for the slightly rising oil price.

Natural gas prices at Henry Hub rose a few cents to close at US$2.88, with warmer than normal weather underpinning the rise.

LNG

Japan still remains the world’s most important LNG market and in that context it is interesting to note recent signals that the nation’s nuclear fleet could return to business next month.  Anti nuclear feelings in the Japanese public are strong, but the Government led by Prime Minister Abe is keen to return to the pre-Fukushima days when the nation ran a trade surplus rather than a LNG fueled deficit.

If this does occur, the already very thin spot market for Asian Pacific LNG will narrow further – just as the likes of GLNG, APLNG, Gorgon, etc, will seek to sell commissioning gas.

Governments and fracking

An interesting story has emerged from the heart-land of the mighty Marcellus shale – Pennsylvania – about negative medical effects of fracking in the State.  A study of various counties that have various degrees of gas production activities thereon has apparently shown that there is a higher incidence of hospital visits in the more frack-intensive counties.  Anti-frackers have claimed a causal link.

Your correspondent offers his support for this link: the large amount of royalties paid to landowners (and associated economic activity) in the frack counties has no doubt led to increased champagne, cocaine and hooker consumption, with unfortunate negative health effects.

Company news – Seven Group Holdings Ltd (SVW)

Today’s The Australian has reported that SVW’s Longtom gas asset offshore Victoria continues to face troubles. with an electrical fault stopping production and SVW now facing difficult commercial negotiations with Santos Ltd (STO) over a new gas sales contract.

Following one of my iron rules of ASX reporting, such bad news was clearly immaterial and did not warrant ASX disclosure by SVW.

Company news – Oil Search Ltd (OSH)

OSH issued its quarterly report yesterday and the main point set out therein was news that the Exxon operated PNG LNG plant has and will continue to operate above name-plate capacity.  Given that obtaining above standard thermal efficiencies for the liquefaction plant in the tropical PNG environment would not be possible, this achievement can no doubt be laid at the feet of the exceptional Exxon ability to deliver difficult projects.

Company news – Real Energy Ltd (RLE)

Cooper Basin explorer RLE disclosed yesterday a resource upgrade for its Queensland Cooper tenements.  The usual gazillion cubic feet of prospective gas in place was outlined (to market yawns), together with some actual contingent resources associated with drilling earlier this year.

Calculating per well recovery rates of < 4 BCF from the announcement, the Company’s aspiration to make this a “tier one” asset seems unlikely to be capable of being met.

At least RLE (unlike Transerv Energy Ltd yesterday) was man enough to mention the “frack” word.

Quote of the day

Proving that some things never change, a quote from ex-PM Paul Keating on Australian politicians’ appetite for expense claims in the 1980s:

“If there was a University degree for greed, all you c**nts would get first class honours!”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s