Today’s Blog – Friday 10th June 2016

Please pass this blog on to others who might like to read it

Note – due to travel commitments, blogs may be intermittent next week


BP has just released its annual Statistical Review of World Energy.  We will have a closer look at this next week to try and pick out any particular – and less reported – items of interest.

One item which has been reported by Reuters overnight is that BP notes that crude oil reserves did not materially fall in 2015, notwithstanding low oil prices and the resultant expectation that the economic pass-mark for qualifying as reserves would not be met by as much sub-surface oil volumes.

The primary driver of this no-change outcome is that most of the reserves which BP records are in OPEC countries.  Reserves in these nations did not change much in 2015 for two basic reasons:

  1. Low cost to extract reserves in countries like Saudi Arabia are still economic at prices well below current ones.
  2. BP is too polite to point out that OPEC reserves are not a technical estimate – but political statements.

We tend to harp on about this second point.  BP knows the reality – but does not want to offend.  That however leads to less sophisticated non-industry types such as politicians incorrectly taking the BP numbers as being methodologically coherent – which they are clearly not.  Adding e.g. US apples with OPEC oranges leads to strange fruit.

Commodity prices

Some profit taking in crude markets took place overnight, with Brent down ~1.5% to US$51.95 and WTI down ~2% to US$50.56.

The rising US dollar tended to trump otherwise bullish data such as rising Indian crude demand, ongoing problems in Nigeria and resumed fire threats in Alberta.

However over at Henry Hub, the bulls had a field day, driving the price up ~6% to close at US$2.62.  The market remains on a tear, with sub-$2 being experienced not that long ago.

An expected hot summer – and hence gas demand for power generation for air conditioning – is cranking the market along at present.

LNG and international gas

A regionally significant new gas discovery was announced yesterday by ENI and BP, who have a 50/50 share in a field offshore Egypt which is reported to have just discovered ~3 Tcf of gas.  This adds to the even larger discovery made by ENI in the same region within the last year.

This gas is sorely needed in the energy starved Egyptian economy.  It will however reduce marketing options for Israel’s gas.  Politically induced delays in moving this forward as quickly as its private sector owners would have liked has (not untypically) come with a cost.

Company news – Central Petroleum (CTP)

The Australian Financial Review (AFR) today contained a short interview with a representative from Jemena – the developer of the commercially challenged NEGI pipeline from the NT to Queensland.

He noted that the spare capacity currently available in the pipeline should be taken up by gas from the Mereenie field owned by CTP and Santos (STO).  [Caveat – if that can still be produced under the expected fracking “moratorium” to be introduced by the expected incoming Labor next Government].

CTP’s wily CEO, Richard Cottee will welcome the strong negotiating position such statements put him in.  Jemena is effectively telling him he is their only potential customer for what will be a sunk investment.  Over to you Richard on what pricing proposal you will put forward….

Company news – Beach Energy (BPT)

BPT yesterday announced the appointment of a new CFO – the ex-CEO of underground coal gasification (UCG) hopeful Carbon Energy, Mr Morne Engelbrecht.  

BPT managed to wisely avoid mentioning the dread word UCG in its ASX announcement.

Quote of the day

A quote from uber-oil-field-optimist, Daniel Yergin, to welcome in the weekend:

“The global oil and natural gas industry is beginning its long-awaited recovery.”

(Aside – tell that to the people at the likes of STO, Shell, BP, etc, who are still being sacked this week…).





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