Today’s Blog – Friday 13th May 2016

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Today’s blog is a short one due to travel commitments


In the tabloid category of “you couldn’t make it up”, the French Energy Minister is seeking to ban the importation of shale gas.  That’s the horrid nasty blue type of methane, not the nice red type.

The Minister in question has not said what she does not like about shale gas – why should she when all right-on types just know that it is bad stuff. Perhaps she does not like any rocks with permeability below a certain level, perhaps she does not like the ancient practice of hydraulic fracturing.  Who can tell.

In any event, recent data indicates that more than 60% of US gas used fracking in its extraction.  There are no separate pipes in the US (or anywhere else) for “good” vs “bad” gas.  Even Gazprom gas might have some nasty practices behind its extraction such as fracking.

So the policy intent seems a hard one to implement.  And will France also cease to import any crude oil or products that have used fracking?

Commodity prices

Crude prices have done well over the last couple of days, with sharp rises during Wednesday’s trading in response to a very bullish weekly EIA report.  The rises continued into Thursday’s trading, and Brent finished up at US$48.08 and WTI at US$46.70.

The EIA noted that crude inventories had fallen by a material – and unexpected – 3.4mm bbls. Furthermore, there were also large product draws, with gasoline down 1.2mm bbls and distillate down 1.6mm bbls.

Henry Hub traded fairly flat, closing at US$2.15.

Company news – AWE Ltd

The most interesting news on the Aussie company front over the last couple of days was an announcement by AWE that its Board had rejected an approach to engage over a friendly takeover by US PE Fund Lone Star – for cash at a decent 30% premium.

In our view this price was hardly the “bargain basement” type beloved of PE, and shows that in Australia at least, the poor commodity price environment is not throwing up screaming bargain asset deals (other than for exploration acreage).

We don’t think Lone Star will go hostile not do we think they will significantly raise their offer.

Quote of the day

A quote which summarises our views on global gas dynamics, from IGU President David Carroll:

“Global energy pricing has entered a new paradigm.  Gas industry dynamics are also changing.   Projects approved several years ago in a more robust pricing environment are now coming on stream. This supply abundance has affected gas hub and spot pricing levels and shifts in the wholesale price formation mechanisms are occurring.”




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