Today’s Blog – Thursday 2nd June 2016

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A recent news story illustrated to your blogster how small the global oil patch can sometimes be – and its endless fascination from geo-political, technical, etc, angles.

This was the unfortunate death of an Australian contractor working on a well site in the contested Golan Heights area of (or occupied by, depending on your point of view) Israel.

Last year NYSE listed Genie Energy announced that it had discovered oil in its drilling operations in the area – but its disclosure was frustratingly brief in terms of any technical details.  Testing of its wells is now underway – but as Israel is a developed nation, naturally there are already protests about the potential for having to use the ancient oil-field practice of fracture stimulating any less than averagely permeable reservoirs.

Genie is working hard – and naturally not giving a stuff about some elements of international opinion over drilling the Golan area – trying to prove Golda Meir’s well known quote wrong:

“Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!”

Your blogster is reasonably familiar with Genie Energy Management – having dealt with them over an oil shale exploration venture they recently pursued in Mongolia.

The degrees of separation in the oil patch – from an Aussie working in Israel, to an Aussie working in Mongolia, etc – are far less than the legendary number of six.

Commodity prices

Oil prices again traded fairly limply pre today’s OPEC meeting in Vienna, with Brent closing down 0.3% to US$49.72 and WTI falling 0.2% to close at US$49.01.  Some rumours circulated during the trading day about OPEC actually making a decision to cap production, but the balance of opinion remains that this will be a “nothing” meeting.

US gas prices are having more fun at present, with Henry Hub again rising fairly sharpish yesterday, closing up 4% at US$2.38, in response to EIA reports on falling production.

LNG and international gas

A day or so ago we noted that Poland would this month commence imports of LNG – including from the US – a preferable source compared to a certain other party to the East of the country.

That certain other party has responded with the following colourful quote:

“There is a well-known fairy-tale about an old woman who asked a golden fish to turn her into a Sea Empress but in the end she found herself back with her broken washtub in front of her.”– Gazprom Deputy Chief Executive Officer Alexander Medvedev

Russian readers feel free to contradict us, but we presume that the US is the tricksy golden fish whilst Mother Russia is the more faithful broken washtub.  In the end of the day, we presume Poland will buy gas from both fish and washtub – but not commit solely to the latter like in the good old days.

Governments, fracking, etc

Yesterday’s Energy News Bulletin included a story on the influence of North Korea on anti-fracking campaigners in New South Wales.  A left wing film-maker has produced a film railing against the evils of fracking (filmed by lentil powered cameras presumably) – and has woven in a story about North Korean propaganda techniques being similar to the rather lame efforts by the oil and gas industry to promote their side of the story.

Well, that’s them told!

Company news – general

This week Sydney has hosted a conference on energy storage issues – and this has generated a fair few follow on news stories.  However, any presence at the conference from the upstream industry seems to have been non-existent – in the midst of publicity on the likes of battery storage, smart electricity distribution systems, etc.

The gas industry in Australia has traditionally been the greatest balancer of energy demand/supply in the country – through e.g. very flexible deliverability capabilities at Moomba and Longford.

Strategically the integrated energy system is undoubtedly evolving and the upstream should be playing a role in that – e.g. getting paid more for gas deliverability, better marketing gas storage, integrating gas and electricity commodity markets more closely, etc.

However, the current lack of funds and dreary focus on e.g. cutting costs to some hypothetical free-cash flow break even point means that it risks being left behind in this fascinating and changing area.

Company news – BP

BP has recently been reported to be looking at an opportunity to add to its fleet of service stations in Australia by acquiring interests held by Woolworths.  In risk profile terms this contrasts strongly with BP’s very high risk/reward wild-cat exploration efforts planned for the Great Australian Bight.

There is a steady drip of news about the Super-Majors becoming increasingly less interested in deepwater exploration – e.g. Exxon and Statoil recently paying out large sums to cancel drill-ship contracts, Conoco announcing it will get out of deepwater altogether, etc.

We consider there is a increasingly high probability that BP will at least delay its Bight exploration plans – and instead look to make a 5-7% fairly guaranteed rate of return from selling petrol, pies and iced coffees.

Quote of the day

The ultimate endorsement has come in for The Donald – from North Korea:

“It turns out that Trump is not the rough-talking, screwy, ignorant candidate they say he is, but actually a wise politician and a prescient presidential candidate”. – North Korean Government spokesmand Han Yong Muck

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