Today’ s Blog – Wednesday 24th August 2016

Travel commitments over the next week or so will render blogging services somewhat intermittent


We note an interesting story in today’s The Guardian (not always the newspaper first reached for by oil-men in the morning) about coal exploration licences in the Northern Territory and a “Texan company”.  The story concerned a recent extension by the NT of said licences – which cover ~15,000 square kilometres of land in the heart of Australia.

That “Texan company” turns out to be near-legendary private oil company, Tri-Star.  Tri-Star is best known for being the pioneer of CBM in Queensland – pegging a large land area, then selling it for cash, a hugely valuable royalty and a hotly contested (by purchaser Origin Energy) back-in (“reversionary”) right.

Tri-Star are adopting the same strategy in the NT – albeit with coal not gas.  We consider that coal mining here is highly unlikely to succeed given the location is about as remote as it could get from a coal exporting port, etc, – but the world is not predictable and most people would have said the same about CBM in Queensland 20 years ago.  A private company can be far more patient than a public one.

Commodity markets

Crude prices fell sharply during Monday’s trading – but yesterday bounced back by nearly 1%.  Brent closed at US$49.96 and WTI at US$48.10.

The market is being pushed backwards and forwards by snippets of comments about a potential OPEC production freeze – and yesterday Iran seemed to be hinting it could be accommodating to such a move (note to readers – Iran’s leadership is highly fractured and there is unlikely to be a single view).

Henry Hub closed up at US$2.76.

LNG and international gas

Reuters has recently reported a story about a changing role for some or all of the Queensland CBM to LNG joint ventures – to be “swing producers” that will throttle production up and down in line with prices.

These JVs are generally thought of as having the highest marginal production costs in the LNG game – due to the need to continue to drill lots of new wells rather than rely on the sunk-capital of traditional highly productive conventional wells.

The Reuters noted that Wood Mackenzie had introduced this swing producer concept recently – which seemed particularly egged on by recent comments from the operator of the GLNG JV, Santos (STO) about not producing up to nameplate capacity – and the views of some market commentators that GLNG may chose to mothball one of its trains.

Governments, fracking, etc

Over in the oil and gas rich State of Colorado – which is also rich in rich NIMBYs, legal dope smokers, etc – a current battle is being waged to potentially allow a vote in November which would greatly restrict fracking in the State.  Signatures to put a vote on the ballot seem to be gaining enough mass to achieve the necessary pass-mark.  It could be close – and legal fights might follow.

Federally, the Donald appeared previously to support the rights of local townships to ban fracking – and Hilary needs to assuage her own left-wing on issues like this.

If Colorado went down the anti-fracking route – then this would provide a lot of succour over in Australia to the stop-the-world-I-want-to-get-off-brigade here – not only in New South Wales, but potentially in Queensland as well.

Company news – FAR Ltd

The game is afoot Watson!

FAR reported yesterday that Conoco had confirmed to it that it has pre-emptive rights over the latter’s sale of its Senegalese JV interests to Woodside Petroleum (WPL).

WPL itself has been somewhat equivocal about said rights – noting in its recent half year results that its deals with Conoco was subject to “any applicable pre-emptive right”.

FAR’s statement is not equivocal – and it is a contractual matter between the existing JV parties, not WPL.

FAR has claimed that Conoco has been deficient procedurally in dealing with the pre-emptive rights – and it has stated that the pre-emption clock has not started yet.

This one will have a few twists and turns yet.

Quote of the day

From Arthur Conan Doyle’s The Sign of the Four (substitute WPL’s Peter Coleman for Dr Watson…..):

At this moment there was a loud ring at the bell, and I could hear Mrs. Hudson, our landlady, raising her voice in a wail of expostulation and dismay.

“By heavens, Holmes,” I said, half rising, “I believe that they are really after us!”




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