Today’s Blog – Friday 4th December 2015

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

Its a slightly shorter blog today due to other commitments

Introduction

Following the shooting down of a Russian plane the flew over Turkey last week, President Putin has accused President Erdogan of being corrupt (through his family’s oil trade with ISIS).  The words “pot” and “kettle” come to mind.

We refer to some previous blog comments about Putin’s alleged vast wealth – including effective stakes in the likes of the Yamal LNG project.  We are reminded of Inspector Clouseau’s reply to questions about how his wife could afford jewellery that cost much more than his annual salary – “she is good with the housekeeping”.

As we forecast last week, Russian sources have now announced that the proposed Turk Stream pipeline project has now been put “on hold”.

Commodity prices

Crude prices experienced a strong rebound overnight following yesterday’s sharp falls.  Brent closed at US$43.84 and WTI at US$41.68.  A lower US dollar and some reactions to rumours of OPEC cuts seemed to be the cause.  “Technical” support at US$40 for Brent seems to still be in place.

The Henry Hub natural gas price firmed a few cents to close at US$2.19.

LNG and international gas

Amidst all the gloom over the LNG industry, one data point this week points to a brighter possible market in the future – this was the PRC  Government ordering the shutting in of thousands of factories in response to the hazardous air pollution being experienced over Beijing and elsewhere on the East Coast.

That’s market share looking to be captured by clean gas in the future.

Governments and fracking

Today’s Australian Financial Review (AFR) questions how ex- Resources Minister  MacFarlane will find dealing with his new colleagues in the rural socialist Nationals party over coal-bed methane (CBM).

Macfarlane has been an eminently sensible supporter of this industry in the past – but is now joining a party driven by policies of populism and asset appropriation.

Domestic pipelines 

The proposed NEGI pipeline project – for which PRC majority owned Jemena recently entered into conditional haulage contracts – has not suffered any collateral damage over the recent Chinese cyber attack on Australian Government interests.

Indeed Jemena’s CEO has today spoken bullishly about expansion plans – to build a new pipeline from Mt Isa to Wallumbilla in Queensland.

We remain sceptical that sufficient sell-side reserves and buy-side long term purchase contracts can be brought together to create the necessary financing conditions for NEGI and new downstream pipelines.  However, Government owned companies can take advantage of low costs of capital – and make commercially imprudent decisions.

Company news – Santos (STO)

STO has made no official announcement as to when its new CEO Kevin Gallagher will join the company.  However, a story in yesterday’s AFR noted this was expected to be in February.   Given the recent history of off-the-record briefings of the AFR by STO, this has the ring of a leak about it.

Other STO based sources have told this blog that Mr Gallagher wants to take his usual January summer holidays before he starts work.  Suffering shareholders (including this blog) will be glad to note they are already getting value for money from the new appointment….

Company news – Shell and BG

Australia’s Foreign Investment Review Board (FRIB) has given approval for Shell’s acquisition of BG Group.

Only Chinese regulators now remain to be dealt with.  They should do a deal.

Quote of the day

A true master of saying nothing – but still moving markets – Saudi Arabia’s al-Naimi on today’s OPEC meeting:

“We will listen, and then decide.”

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