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Today’s blog is shorter than normal due to other commitments
The Queensland Government introduced a new bill (the Environmental Protection (Chain of Responsibilty) Amendment Bill) a few days ago which has potentially significant ramifications – some of which would likely be unintended – for oil and gas operations in the State.
Followers of Queensland news will be aware of the current severe financial difficulties facing Clive Palmer’s Queensland Nickel (QNI) refinery in Townsville. The business is basically broke and faces an almost impossible to surmount secular environment given low nickel prices and its high cost structure. It is highly likely to go into liquidation in our view.
That would leave a very large environmental clean-up bill associated with tailings dams, etc – estimated to be up to A$1B – without a home – which means the Government would have to pick up the tab.
The new Bill appears to be a knee-jerk reaction to this risk – as it seeks to spread much more widely who the Government can get to carry the can in such scenarios.
We think the consequences for the oil and gas sector will include:
- It will be very difficult to sell assets to parties without very strong balance sheets unless the vendor retains unappetising risks.
- Late life assets will therefore not find their logical “low cost” homes and could be shut in sooner than otherwise warranted.
- Current sales programs for Queensland assets may have to be delayed or aborted as the legal consequences of the new law are examined.
- For instance, Origin Energy’s (ORG’s) on-foot sales process for its Cooper Basin assets may be affected.
- Other States may well follow Queensland’s lead.
Yesterday the bulls had yet another run, with Brent closing up ~3% at US$41.38, whilst WTI finished even stronger at US$40.34 (the first time it has closed above US$40 this calendar year).
The drivers were a weakening US dollar – and continued wild hopes that next month’s meeting in Doha of OPEC and Russia (but it seems not Iran) will deliver “something”.
Henry Hub also finished strongly, up ~4% at US$1.94.
Company news – AWE
AWE has announced the selection of its new CEO: David Biggs (currently CEO of smaller E&P company Cue Resources). Mr Biggs should start in ~6 months time after he works his notice at Cue.
Quote of the day
We are sure George Orwell did not mean to extend the following sentiment to hard working bloggers:
“All writers are vain, selfish and lazy”.