Today’s Blog – Wednesday 28th September 2016



Bad news has just come in its traditional number of threes for the UK’s oil and gas industry.

Firstly the currently cretinous UK Labour party – the party that makes Victoria’s Labor Party seem grown up – has joined the international anti-intellectual bandwagon of banning fracking.  The only consolation for the industry is that the chances of Jeremy Corbyn actually taking the reigns of power are about the same as the multi-bankrupted presenter of The Apprentice becoming leader of the free world.  Wait a minute!

Secondly (perhaps in a move to avoid cross-Atlantic investigations by the SEC a la Exxon…) industry body UK Oil and Gas has just downgraded North Sea crude reserves by around 25%, as low prices continue to make what were previously considered to be viable potential developments uneconomic.

Lastly, the decline of the North Sea has been shown up by the first import to Scotland of a cargo of ethane from the onshore US (note to the Labour Party – and the Governing SNP in Scotland – said ethane was produced by the horrendous process of fracking which causes water out of taps to go on fire – didn’t you see it on Facebook?).

Commodity prices

The first few days of this week has seen oil prices go up and down depending on the street strength of the OPEC Ice currently being dealt out from a meeting in Algeria.

Overnight Brent closed down at US$46.29 and WTI at US$44.93.  The market seemed to have twigged that smoking said Ice was not good for and it all the recent rumours about freezes and deals were not going to be delivered on.  OPEC’s more formal November meeting will no doubt see similar smoke blown from Middle Eastern hookahs towards market traders again in around three weeks’ time.

Meanwhile Henry Hub is hovering around the US$3 mark.

LNG and international gas

The Indonesian Government is pressing Shell, Inpex and the other owners of the Abadi gas field located in the South of the Archipelago to move forward with LNG development plans.

The best economic outcome for this resource would be to be pipelined to Darwin – where it would match very well the soon hungry-for-gas Darwin LNG asset.  But where do economics rate when it comes to moving gas across borders from a prickly poor country to an occasionally arrogant rich one?

Its relatively safe to predict that Abadi will still be undeveloped in ten years time.

Governments, fracking, etc

We noted recently that the development of AWE’s Waitsia gas asset in the onshore Perth Basin could become hostage to a change to a Labor Government post the March 2017 election.  A quick Google search (err, we mean in-depth investigations by your blogster) have discovered that the typical plan of imposing a “moratorium” is in fact WA Labor policy since its convention last year. Who knew?!

The industry (and Perth based readers who like warm showers) will be hoping that reason will prevail as and when Labor wins the election and the policy quietly gets junked.

Company news – AGL Ltd (AGL)

AGL is holding its AGM today.  It has just announced that Oil Search’s long time and highly successful MD, Peter Botten, has joined its Board as a NED.

AGL’s Chairman has announced he will retire at the next AGM.  Time for Peter to settle in and take the reins?  In our view he is by far the best candidate on the AGL Board (the other NEDs may have a different view….)

Or will the plans and timing for his executive retirement at OSH make that transition too hard?  (the other AGL NEDs may have a view on that…).

Company news – Blue Energy (BUL)

Unprecedented news from the small cap end of the market. BUL’s Chairman, ex-CEO of Santos John Ellice-Flint, has just used $1M of his own money to buy shares in the Company.

All other small cap Directors may react in horror to this dreadful precedent.

Quote of the day

Your blogster is increasingly interested in the rapid developments in electric vehicles and what that might mean for the future demand for crude (notwithstanding BHP’s recent pooh-poohing of this risk).  The following quote from Tony Seba’s book Clean Disruption shows that the players involved are not inconsequential;

“At least three multi-trillion dollar industries are now investing billions to come up with better batteries: electronics, automotive and energy.”





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