Today’s Blog – Wednesday 10th August 2016

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The new leader of the National Party in Western Australia, Brendon Grylls, has as his leading policy a plan to enrich lawyers and increase sovereign risk for the country, err, we mean to seek to unilaterally break long term contracts and steal money from investors, err, we mean to raise taxes on certain – but not all – iron ore production in the State.

Note to Mr Grylls: you are supposed to be a conservative, not channel Jeremy Corbyn down under.

This policy will likely go nowhere – but does show that it is not only silly despots in those awful third world countries that cut their noses off to spite their faces with such policies – we here in sophisticated mining destination Australia occasionally do so as well.

The oil and gas industry is currently generating such weak returns that similar moves to increase taxes on this sector lack any sort of identifiable bounty to attack.  That could change in the long run, but the annoying reality is that absent Gippsland in its prime, Australia does not host any world class oil and gas assets (fingers crossed for the upcoming Bight drilling….) whereas WA iron ore is very much a Tier 1 mining asset.

Commodity prices

Crude slackened off slightly overnight, closing down ~0.3% in both London and New York, with Brent at US$45.03 and WTI at US$42.75.

It presumably dawned in some sections of the market that a few lesser members of OPEC talking up cooperation dosen’t amount to a hill of sand in Saudi Arabia.  Additionally, EIA forecasts for US production over the next few years were also stronger than the bulls might have liked.

Henry Hub took a bit of a pasting, closing down 6% to US$2.61.

LNG and international gas

An interesting regulatory comparison between two of the more interesting but challenging international pipeline projects – Alaska LNG and Power of Siberia.

The link below gives access to gigabytes worth of reports on the former (a project which in our view will now not go ahead for many years given the international competition – a fact likely internally recognised by its Super-Major proponents – but who are still spending US$100Ms on this sort of stuff):

And you won’t be surprised to hear that there are no such equivalent documents for Power of Siberia.  Partly lack of disclosure – partly poor governance – and partly they are just getting on and doing it (albeit more slowly than pretended in Moscow and Beijing).

Governments, fracking, etc

A recent survey in Victoria conducted by Friends of the Earth found majority support for a permanent ban on fracking.  No wonder, given the loaded question:

“Do you support a permanent onshore gas and fracking ban to protect against damage to water resources and important agricultural industries?”

Why not re-phrase it as:

“Do you support having cold showers, eating raw meat, living in the dark and dying when you are thirty, or the regulated adult trade-offs associated with modern living for the last few hundred years?”

Company news – FAR Ltd (FAR)

News from on-line investor chat forum cum war-zone, Hot Copper, rather than a formal ASX announcement – rumours sourced from a Tweet passed on from a London based blogger close to FAR – the pre-emption period for Conoco’s sale of Senegalese assets to Woodside could be “extended” beyond the one month previously speculated on.

FAR has said nothing publicly about the term of its pre-emptive rights.  Its JOA will likely have the usual terms about keeping its terms confidential on the one hand but allowing disclosures when required by e.g. a Government or exchange.  The reflex position of big companies will be to say “Nyet!” to small ones and FAR presumably does not want to fight that.  But – a fully informed market?

Quote of the day

Kim Beasley, ex long time Australian Ambassador in Washington, has raised even more severe doubts about the consequences of The Donald for Australia than this blogs “eek, that’s where we live!” of a few months ago:

“We can’t afford to sit back and let mayhem rule….Australia dosen’t have the capacity to readily survive an uncoupling of our bilateral defence relationship wth our national security intact.”

To which The Donald might reply – “and Joe Sixpack from Boise Idaho gives a rats about Australia?!”


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