Today’s Blog – Wednesday 5th October 2016

TRAVEL COMMITMENTS THIS WEEK MEAN BLOGGING WILL BE INTERMITTENT

Editorial

We noted a few weeks ago that an interesting battle of words and ideas could develop between two of the more effective communicators (and successful CEOs) in the Australian energy space – Central Petroleum’s Richard Cottee and APA Group’s Mick McCormack.

In an interview in today’s Australian Financial Review, the latter has come back from a bout of illness to go on the offensive – for instance calling Richard’s Northern Territory reserves as “bugger all” in terms of their size.

Furthermore, Mick has paid for some consultants to tell him that his company is delivering economic benefits – quelle surprise!  For instance, the consultants reckon that APA’s control of most of the East Coast pipeline network delivers economies of scale.  By that analysis, communism would be far more efficient than messy old competitive capitalism.

We are naturally on the side of the plucky producer (and even the downtrodden consumer) in this fight – so come on Richard – your turn to point out to Mick that for instance, it could be argued that 90% of the share price performance of his company is down to the reduction in interest rates post GFC to multi century (if not longer) level lows…..

Commodity prices

Crude markets have been on the nod in the first two trading days of this week post their injection of OPEC heroin last week, with trading up ~1% on Monday and then closing flat last night at US$50.87 in London and US$48.69 in New York.

Meanwhile some ominous production notes could be heard – such as Russian authorities announcing a post-Soviet production record of 11.1 mmbopd, Libya increasing production, Nigeria with a major offshore production venture due to come on line, etc.

On the supply side, a potentially very large conventional (what’s that daddy?) discovery has just been made in the US – in shallow waters off Northern Alaska by PE backed company Caelus Energy.  The latter has just reported that this could have a production potential of 200,000 bopd – which could readily be taken to market through the 1/4 full Trans-Alaska Pipeline.

Henry Hub has also traded flat at US$2.92.

LNG and international gas

We noted recent news of the sacking of Mozambique’s Oil Minister could be disquieting for the country’s LNG projects – however they seem to be proceeding apace, with news that ENI and BP (the latter as offtaker) have firmed up a gas sales contract from Eni’s planned FLNG development in the country.

Another recent piece of disquieting news for an LNG project was press speculation that Malaysia’s Petronas was looking to sell its operated interest in British Columbia based Pacific Northwest LNG project.  Petronas promptly denied this (although cynics might say the denial came from a country whose Prime Minister has repeatedly said “that money was just resting in my account, anyway it was a present, anyway I have paid it back, anyway you are arrested!”).

Governments, fracking, etc

The UK (or England at least – not the oil and gas supporting/hating delete as appropriate nation of Scotland) seems to be inching towards allowing the long delayed drilling of the shale prospect licence to Caudrilla Energy.  The ruling Conservative Party largely supports this (especially if drilling is limited to the flat-capped North) and will want to be seen to be business-friendly as the otherwise chill winds of Brexit increasingly blow.

Both sides of the debate will no doubt not grasp the technical complexities and uncertainties involved in appraising a shale play – one side expecting gas flows soon – the other expecting gas flows through their taps equally soon – rather than a much longer likely long term scientific grind.

Quote of the day

From last week’s Economist:

“Even if every trader suspects that OPEC in fact no longer does matter, OPEC will remain powerful until everyone knows everyone else agrees.”

 

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