Today’s Blog – Thursday 19th November 2015

Please pass this blog on to others who may want to read it

Today’s blog will be a “flash” one due to some other commitments

Introduction

Reactions are building to the long term lease of Darwin’s port by Chinese company Landbridge Group.  The Australian Financial Review (AFR) today reported that no less than President Obama had raised the issue with Australia’s  PM at a current APEC conference.

Landbridge is connected to the Communist Party and the People’s Liberation Army.  But for large Chinese companies at the least the former is the norm.

Perhaps as a political response to the current hubbub over the issue, the Federal Government has today blocked the purchase of a large agricultural business by a Chinese concern.

What is the relevance of this for the energy industry in Australia?  Landbridge owns a CBM company in Queensland – Westside – which supplies GLNG.  It also recently bid for ASX listed company Armour Energy (which not coincidentally owns acreage in the Northern Territory).  It therefore presumably has ambitions to grow.  However, the current political environment is likely to be a difficult one for it to do other than keep its head low – at least for a time.

As we noted a few weeks ago, the taking of a strategic stake in Santos (STO) by Chinese PE group Hony did not seem to attract FIRB interest – and of course STO management denied that the stake was strategic (but spruiked the irreconcilable fact that a premium was paid for it).

Even a few weeks on such dealings would likely face higher political/regulatory risks.

Commodity prices

Crude prices closed up over-night – but not without testing a sub-US$40 figure in the US.  The key boosting factor was the weekly EIA report which noted that US inventory builds last week were only 300,000 bbls – quite a bit less than anticipated the day before.

Product builds were a net 200,000 bbls.

The Henry Hub gas price closed down slightly at US$2.35.

LNG and international gas

The Shell takeover of BG Group passed another key regulatory milestone today – the approval of the transaction by Australia’s competition regulator, the ACCC.

The approval was without conditions – notwithstanding some recent press  speculation that some asset disposals (such as the Moranbah CBM field) may be required.

The only remaining material regulatory impediment to the transaction now sits with the Chinese regulators.  We expect Shell’s dealings with them to be transactional rather than legal and eminently capable of being managed.

Accordingly, the creation of the Big Daddy of the LNG patch in Q1 next year now seems close to a done deal.

Governments

The Northern Territory’s news on the NEGI pipeline (whether one is a cynic or not) has now been followed up by the lock-the-gate crowd raising concerns about actual private sector economic activity being created in the Territory (in the form of drilling and stimulating wells).

The Government has had to respond with the usual stuff about strong controls, limits on access, etc, etc.

Aubrey McClendon may find managing all the necessary stakeholders in the NT is harder than in Oklahoma….

Quote of the day

As we approach OPEC’s next meeting in December, the noise from various members calling for action (i.e. for someone else to reduce production) is being met with a straight bat by the Saudis (who however are not known for their cricketing prowess).  Their position is summarised as:

“The only thing to do now is to let the market do its job”Khalid al-Falih, chairman, Saudi Aramco

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